5 Surprising Sources of Financial Issues
A lot of executives, especially entrepreneurs, think of themselves as independent, but the truth is very few businesses stand alone. The financial wellbeing of your company may be much more dependent on other companies, and random factors, than you like to admit. The most obvious connections are between you and your clients. If a client stops paying bills, it can have a huge impact on your bottom line.
These five areas are often overlooked as sources of financial stress for companies. Being aware of the effect they may have on you or your customers can help you prepare for potential financial problems.
Don’t think the weather can impact your finances? Tell that to companies in Houston, New Orleans, or Puerto Rico, or companies that do business with those companies. Obviously storms and hurricanes cause problems, but even small things like a wetter than usual spring can affect anything from crop prices to transportation. You don’t have to become a meteorologist, but do keep an eye on which way the wind is blowing for your customers and suppliers, literally.
Every person you hire is both an investment in your business and a potential risk. Pay attention to who and how your clients and suppliers are hiring. If you don’t feel that they are using good hiring and training practices, this could be a warning sign for you.
It may seem like if a company can loan money to others that they’re doing well and there’s no cause for alarm. However, not everyone is as careful about credit applications, checks, and procedures as they should be. Pay attention to the loaning practices of others to get an idea of how stable the companies may be in the future. It goes without saying that you should not extend credit to companies that are not extending credit wisely themselves.
Businesses that rent space can find themselves quickly out of a space if the landlord sells the building or raises the rent. But, even businesses that own their own buildings can be affected by the real estate market. Many companies (and people) borrow based on the equity they own in their building or house. A sudden rise or drop in the surrounding real estate market can change things dramatically for a business.
A company does not have to be the victim of crime to be affected by crime rates. Like real estate and weather, a change in crime patterns can make a company more or less able to borrow money, sell products, or just do business. There’s no need to stay tuned to the police scanner, but being aware of crime rates and other issues surrounding your clients is one way to keep track of their health.
No matter how closely you follow your clients and the various details that affect their businesses, it’s always possible that a former trusted client will stop paying bills. If that happens, we hope you’ll reach out to The Kaplan Group for help in resolving your commercial debt collection issues.
About The Author:
Dean Kaplan is Principal at The Kaplan Group. Dean's expertise is widely recognized in the debt collection industry. His advice has been published in a number of industry newsletters such as Credit Today and InsideARM and he is a frequent speaker at industry events.