COVID disruption has added a further layer to the business risk cake. Do you know how many of your customers are at risk of failure?
It is estimated that between 20% and 30% of small businesses, and a sprinkling of larger concerns, will cease to trade as we start to emerge from COVID lockdown; if indeed, that is what the politicians and scientists confirm will happen from 19 July.
Additionally, at the end of September, the major source of support for employment, the furlough scheme, is coming to an end. We should expect a significant rise in unemployment following that change.
Which is why we recommend that all businesses undertake a re-assessment of business risk on multiple levels so that services and goods supplied are paid for and bad debts kept to a minimum.
Initially, we suggest you divide your customers into Can Pay, Cannot Pay (they have cashflow issues) and will not pay (bad payers) categories.
Secondly, rank customers as T (transactional) or R (relationship). Transactional customers are concerned about price, quantity, and delivery, i.e., always want more for less. Transactional behaviour is the default position for many businesses in a crisis. Relationship clients are more open to conversations about the value of the goods or services you supply. They will enjoy their business relationship with you and be loyal customers.
Last of all, ranked customers 1 (low) to 5 (high) for risk of failure.
Using this approach, we would like to offer you our support to undertake a formal risk assessment of your customers.
This will enable you to better manage risk with eyes wide open rather than stumbling into situations where work is undertaken, or goods supplied in areas where there are increasing risks and where customers may not have the inclination or resources to pay.
If you would like to undertake a formal review of business risk, but do not know where to start, pick up the phone, we can help.
