Reviewed: 19th April 2017
If you think a supplier or customer is experiencing financial distress, it is important to find out as much as possible about their situation, to prevent it having an adverse effect on your own business.
Spotting the signs of financial difficulty early on allows you time to readjust and reorganise your sources of supply, or to understand your options should a customer go out of business. The knock-on effect when you lose a business connection like this can be significant, particularly if a principal supplier or key customer is involved.
So what should you look out for, and how can you protect your own business?
The inherent risk of offering credit to your customers can be mitigated with a strong credit management policy. Performing credit checks on your customers, not only at the beginning of your business relationship, but at regular intervals, help to keep abreast of any noticeable decline.
Other useful policies when dealing with credit risk include presenting clear terms of trade in all of your contracts. In this regard, terms and conditions might include:
It is also possible to find out valuable financial information from Companies House. You can examine a company’s last set of accounts, find out whether they have sold any business assets and if the proceeds have been used to pay trade creditors – a common sign that cash flow is an issue.
Real Business Rescue provide director advice online, over the phone, or in-person at one of our 55 UK offices or a place of your convenience.
12th December 2018
Small and medium-sized enterprises (SMEs) across the UK are paying increasingly large sums of money to collect amounts owed to them by their clients and customers.Read More
4th December 2018
The number of independent retailers who closed down outlets during the first half of this year reached a record high level for any comparable period.Read More