The most recent Commercial Risk Outlook Report from SV Partners has found that 8,782 businesses in Australia are at high risk of financial failure in the next 12 months. The report, which was released in March 2019, also listed the industries that are most vulnerable to financial strains.
These industries include:
- Construction,
- Accommodation and Food Services
- Retail Trade
- Professional, Scientific and Technical Services
- Financial and Insurance Service
It can certainly be alarming to see such a high number of businesses at risk of default, especially if your company is in one of the industries mentioned above. But the good news is that there are simple steps you can take to protect your business and strengthen its financial position.
How to Protect Your Business from Commercial Risk
1. Closely monitor your cash flow
If your business belongs to one of the industries that are at high risk of commercial failure, you must keep a closer eye on your finances. Take time every week to review your cash flow with your accounting team. Make sure you have enough working capital to settle your monthly bills and pay off your loans.
You also need to monitor your invoicing and collections process to make sure you get paid on time. Don’t let unpaid invoices pile up. If you are unable to contact clients after a couple of attempts, don’t hesitate to forward their accounts to our debt collection team here at Slater Byrne Recoveries.
We use a simple yet highly effective model to recover debts that no one else can. Our team can also help you assess your current financial position and create practical solutions for proper cash flow management.
2. Manage sales with your credit policies in mind
Your focus should not only be on selling as many products and services as you can, but also on making sure you sell to the right customers. That is, customers who actually pay their invoices on time. To do this, you need to have a proper balance between sales and credit management.
Include good credit management practices right at the beginning of your sales process. Train your sales team to choose clients with good payment histories. This way, you can reduce the risk of bad debt or late payments. Your sales team should also know your credit policies and understand the importance of establishing clear payment terms with customers upfront.
In addition, make sure that your records are complete, accurate, up to date, and easy to access. This will help make the collections process faster and more efficient.
3. Create a financial risk management plan
If you don’t have a financial risk management plan, now is a great time to start creating one. This plan allows you to forecast and analyse financial risks that your business might be exposed to. It also helps you identify the procedures or strategies that must be implemented to minimise the impact of financial risk or avoid them altogether.
If you already have a financial risk management plan, you may need to update it in light of the recent Commercial Risk Outlook report from SV Partners. When you do this, be sure to rank financial risks according to their gravity and their potential effects. This way, you can prioritise solutions for the more serious issues before they get out of control.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently working in a Marketing/Head of Sales capacity at Slater Byrne Recoveries.