The world is currently in a crisis and even though it may not affect you directly, its impact is inescapable.
Everyone is talking about the energy crisis right now along with the supply chain problems. These issues are having a huge impact right now on consumers and businesses, but have you thought about how these issues may impact your own business even if you are not directly affected yourself?
We have put together some key measures to help you minimise the risk to your business.
The first step you should take is to assess your current clients. You can do this using a RAG status system. This should highlight potential clients who are at risk of being affected. You should be extra vigilant about those in Haulage, importing, food manufacturing and reliant on delivery services. These issues could impact sales or cash flow for your clients, probably a mix of both.
Once you have identified which clients are potentially at risk it may be an idea to get your account management team to have a quick call to get a feel for where they are and if they are already feeling the pressures of these issues.
It would also be a good idea to flag these clients to your credit control team who can be more vigilant and flag any payment issues that may arise promptly.
Credit Check regularly
This is something that finance should be doing regularly but is especially important right now when bringing in new clients or for existing clients who may be facing difficulties. Depending on which service you use to carry these out, you can access recent data such as how quick they pay suppliers and current cash position. These factors can help identify potential cash flow issues.
Work with your clients
Always work with your clients if issues do arise. Cash flow issues could just be temporary so it would be advantageous to get your account managers to have a call with them to talk about potential or current cash issues and offer some solutions to help such as pausing retainer work temporarily or putting a payment plan in place. It is always best to talk to your clients rather than going in heavy-handed chasing money, this can help keep the business relationship intact through difficult times.
It may be useful for your own benefit to carry out some sensitivity analysis based on what would happen if you had to pause some of your clients or if they had to leave, this will give you a good idea of how your business could be financially impacted and ensure you can put some rough action plans together for worse case scenarios.
Refocus your target market
If you do have clients who are impacted by these issues, it may be worth pivoting your marketing strategy to other sectors that are unaffected. Targeting these potential clients will help balance some of the risks you are having with some of your current client base.
Consider your own employees
If your employees work from home or in the office, consider how they may be affected by these issues. Think about:
- Do they have to travel for work in their own transport?
- What if they are unable to get fuel to get to work?
- Are they reliant on their own transport to do their job?
- Are they able to work from home?
- Are they able to use public transport?
- Do you have contingency plans in place for this?
- What about when winter hits and energy prices rise?
- Have you gone fully remote?
- Will some of your employee’s be affected by rising costs of gas and electricity at home this winter?
If you are a hybrid workplace maybe reiterate about coming into the office if they would like to.
Don’t forget the other areas of your business
We have focussed here on clients so far but could any of your suppliers be affected by these issues, if they could, how may that impact you? Will they have a large impact or a relatively low impact? What areas of your business may be impacted? Are there other options or replacements you could look at to minimise your risk?
Whilst you can never fully anticipate every eventuality following these measures can help you focus on where you may suffer the most impact and help you put steps in place to minimise your overall risk as much as possible.
If you have any questions, don’t hesitate to get in touch with us.