Don’t Let Their Cash Flow Problem Become Yours!

I had a problem. One of my clients had requested insurance coverage on a key customer and after looking at the financial situation, the request was refused. It seems the company wasn’t doing well financially and had become too risky. My problem was that I thought this news may not be easy to share. After all, who likes to be told one of their customers isn’t a good financial risk and is actually in some trouble?

To my surprise, when we got to the subject of the key customer, my client’s reaction was relief! Turns out that at that very time, the customer was asking for even longer payment terms. “I don’t want their cash flow problem to become my cash flow problem”, she said.

3 Lessons

1. Would it help to have another set of eyes on your customers? If you had access to an international team of financial analysts who monitored your key accounts and warned you of changes to their financial position, would that help your business? How? What if the customers were in foreign countries?
2. Knowledge is power. The power to avoid a problem before it bites you. The power to respond to your customer, knowing the background behind their question. The power to put your sales efforts into growing with customers who are more likely to pay and those that are more profitable.
3. Trust your sources of information. Years ago when I got a private pilot’s license, I was taught to always trust your instruments. Otherwise, your senses would make you think you were flying upside-down even though the instruments said otherwise. Not trusting your instruments resulted in bad things happening. Same truth applies here. Use reliable credit information sources and trust what they tell you.

So, how’d it turn out?

Not long after our phone call, my client spoke with her customer. Instead of giving them longer payment terms, she held firm. Their cash flow problem didn’t become her cash flow problem.

“It’s honestly great information for us to now have and not extend (our company) in a place for client’s who are not in the best financial position and create more risk for us…”

If you’d like to know more about your customers and gain knowledge that gives you power,  email me at tate_parker@coface-usa.com to set up a 15 minute phone call.