If a customer or supplier is in trouble, the earlier you spot the signs, the sooner you can take action to protect your business, says Feargal McCormack.
When a key customer or supplier is in difficulty, this can have serious consequences for your business. One way to protect yourself is to learn to recognise signs of trouble. Typically, these include:
◆ Customers or suppliers who avoid communication
◆ Partial or missed deliveries
◆ Deterioration in the quality of products or services
◆ Late payments, especially if customers continuously exceed their credit terms or start issuing post-dated cheques, or pay round sum payments on account
◆ Customers or suppliers who fail to maintain their buildings, equipment or other assets
◆ Managers leaving the company or abnormal staff turnover
Know your customers and suppliers
Knowing your customers and suppliers is very important. At the outset of each new relationship, it is a good idea to run a Companies House / CRO check and credit check. These will tell you how long the business has been in operation and whether there are any credit-related issues to be aware of. Check if the business files its accounts on time. Late filing might indicate poor accounting systems. A customer or supplier who does not know whether they are making or losing money might not be an immediate risk for your business, but they could be a risk in the medium term and should be closely monitored.
When embarking on new contracts, pay close attention to the terms as these can protect you in the event that the businesses you deal with fail to deliver the products or services promised. Remember to review and update contracts to reflect changes in your business requirements.
Supply chain and contracts are particularly important as companies prepare for Brexit. FPM was recently appointed a Brexit Service Provider for Intertrade Ireland’s Brexit Advisory Service which offers support for SMEs. Funding of up to £2000/€2000 for professional advice is available through the ‘Start to Plan’ initiative for eligible businesses in NI and ROI who trade on a cross border basis. Further information is available on the InterTradeIreland website.
Finally, remember it is also critically important that your management information systems alert you when things are amiss with customers or suppliers so that you can take appropriate action to limit the impact on your business.
Increasingly, FPM clients rely on real time accounting systems to reduce risk and make it easier to spot when things go wrong. These systems can be implemented on a step by step basis. For more information, please contact a member of our Real Time Accounting Business Advisory Team.
Feargal McCormack l Managing Director