Records dating back five years ago indicate a harsh reality; that more microbusiness runs out of business than succeed.
No one is safe; even long-established firms aren’t resistant to bankruptcy. Statistics by Kaplan Collection Agency show a steady rise in the count of businesses that apply for bankruptcy protection over the past five years.
For companies that offer B2B services to business customers, this calls for a well-thought-out plan to safeguard your company from the effects of a failing business.
A sinking brand can threaten to bring down your B2B service if it liquidates and exits without settling overdue debts.
Follow these steps to stay safe;
- Be in touch: Maintain communication with your bankruptcy-prone client. A healthy business relationship can lead to an excellent deal, even if your client goes bankrupt.
- Do not depend on a single client: It is not safe to depend on income from a single business customer. Attract other customers to stay safe if your main client runs out of business.
- Hammer out a deal with financially unstable customers: Begin discussing payments early if you notice a bankruptcy-prone customer. You could ask them to pay in part and clear the rest slowly or show partial leniency. This will relieve you of the burden of going to court and ensure you get something. It is a better strategy than losing everything.
- Request for early payment: Always request clients to pay before you finish the job to avoid plunging into cash flow issues. Late payments will force you to dig into your business reserves.
- Take Charge: A client that’s between a rock and a hard place may not recall all the debt it owes every single vendor. You must take charge and send formal reminders and follow-up to get on the same page with your customer.
- Be thorough with records: Keep clear records of all contracts with your customer, including messages and deliveries. These documents will prove handy if you go to court to petition unsettled invoices.
- Begin searching for a replacement. This is also the time to start searching for possible replacement(s) to avoid substantial revenue losses.
The Bottom Line
Financial difficulties are an unfortunate part of running a venture. A B2B company must watch out for bankruptcy-prone customers and take measures to protect their bottom line.
Author Bio: Michael Hollis is a Detroit native who has helped hundreds of business owners with their Merchant Cash Advance solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.