On D-Day, June 6, 1944, as the American troops embarked on landing craft toward Hitler’s Atlantic Wall and the invasion of Europe, a sergeant in one of the boats said to his troops, “Men, we’re going into combat and casualties are expected. In fact, 2 out of every 3 of you are expected to be killed. Look at the man on your right and on your left and only one of you will survive.” As the story goes, the soldiers looked around at each other and said, “You poor son-of-a-guns, it’s been nice knowing you!”
Just as casualties were expected on D-Day, so are losses expected any time a business extends credit to its customers. There’s always a chance that someone won’t pay. On average, every 5 years or so a company will have a customer default unexpectedly.
While extending credit in business is not the same thing as going into combat, we as executives and financial managers should not be like the soldiers on D-Day and assume it will always be the other guy. Sometimes it isn’t them, it’s us!
In a recent conference that I attended, an expert in advising large companies on crisis management (think United Airlines and the passenger being forcibly removed from the flight earlier this year) said that it’s not only the generals that fight the last war, company CEO’s and owners do too. “We all look out of the rear view mirror”, he said. He was talking about ignoring a public relations crisis and the impact of social media and public outcry.
I immediately thought that the same could be said for assuming that a customer that has always paid, will always pay in the future. Don’t operate your business by looking out of the rear-view mirror.
And don’t be like the soldier in the landing craft.
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