Small Business Owners Looking to Minimise Credit Risks
A new finding by the credit data corporation shows a shocking rise in financial hardship including small business owners. Though Kiwis have banded together and done a great job of navigating the Covid-19 crisis, everyone’s finances have been affected. The New Zealand way of life has been the envy of countries around the world. And yet, small businesses are struggling during these unprecedented times.
Many economic experts believe that the full impact of the pandemic has still not been felt in New Zealand and other countries. Most people are looking forward to 2021 in the hopes that this will be a much better year for everyone. As we all move toward the future, experts are recommending a few steps that small businesses can take in order to minimise the financial damage.
Step One: Minimising commercial credit risks
This is all about reducing the amount of money you owe to businesses. Though creditors will be more lenient during these challenging times, it’s important to exercise caution before making big purchases.
Step Two: Work with suppliers
Since everyone is struggling at the moment, suppliers will be willing to work with you. However, the current business environment does not favour high-risk businesses.
Step Three: Manage cash flow better
Right now, it’s important to have a healthy cash flow in your business. You may not be able to spend at your old rates. Sometimes waiting to buy certain supplies and equipment is better because having cash in your accounts will make you feel more secure regardless of what the future holds.
Step Four: Thorough credit checking
Minimise financial risks by looking at the long-term payment history of anyone seeking credit. Make sure they have a well-run organisation with sound business structures in place. You could put your own company at risk by extending too much credit to a high-risk business.
Step Five: Recognise and support at-risk customers
In these tough economic times, more customers are unable to pay their bills on time. The coronavirus has had a severe impact on everyone worldwide. Every business has a few high-risk customers. Try to identify them and then extend offers of support to keep them stay engaged in paying their bills on time.
Form good relationships
As we move forward, it will be more important than ever to have a good relationship with every customer. It is mutually beneficial to offer support and alternative payment options. This is not only the right thing to do, but it’s a good business decision. The goal for all business owners is to survive the Pandemic and come out of it still thriving on some levels. Payments may take longer to receive, but remain positive and engaged with customers.
Use technology to stay informed
Today, you’ll find a good range of tools available that can help with these issues. Try setting up Alerts that go out to customers to remind them of payments. Offer to help with payments if necessary. Make use of technology to monitor risk factors. Remember the old adage that says, “Knowledge is power.” By staying on top of things, you can head off any payment delays or delinquencies.
Manage credit risk properly
Though credit risk is an inherent part of operating your business, you can take steps to monitor, manage and minimise the risks. Today’s accounting programs have numerous tools available to make this job easier. Programs such as Centrix’s Portfolio HealthCheck allow you to compare your portfolio against datasets and key indicators to give you a broader idea of your risk status and performance.
The reality is that while you cannot fully eliminate risk, you can greatly reduce it with a good system of checks and balances. If you feel uncertain about some issues and situations, then seek the help of a professional. Get all the info you can to make informed business decisions. Remember that this present crisis will eventually come to an end and life will gradually return to normal for all of us.