Every business needs to have customers or clients in order to succeed. They are the lifeline of every business, however you may encounter clients that look like they’re doing great but are actually hiding their financial problems under the corporate rug. These clients can be a problem for you as you have provided services, products or both to them already and it could cause you to face financial problems yourself if they are unable to pay their dues. The first step to protecting your business is to make sure that you know the early signs that your clients may be having financial problems.
What Signs Should You Be Aware Of
The first thing that will be coming to your mind when dealing with clients isn’t always going to be the chance that they will leave you with an outstanding debt. However, this is the harsh reality that some industries like the staffing and recruiting, online marketing and social media industries face on a daily basis. The best way to keep your business from falling victim to these debts we’ve put together a number of signs that the company you’re dealing with may not be around for much longer.
Payments Start Coming In Late
The biggest sign that a company is having trouble is the fact that their payments start coming in late. Companies that start paying their creditors like this are usually in panic mode and are trying to conserve money to keep their own business afloat. However, this means that non-essential creditors are left waiting for their payments months at a time. These companies that used to pay like clockwork have suddenly started paying thirty, sixty and even ninety days later than the expected pay date and it can cause you to miss your own deadlines.
High Turnover Rate, Mass Lay-Offs, or Both
Another sign that a company may be having financial trouble is that their employees stick around for very long. This could either be caused by heavy handed company policies, clashing company culture, and unnecessary budget cuts. During the final stages of a bankruptcy a company is very likely to let go of most of their non-essential staff to make room for a skeleton crew that can try to get the business back on its feet. It is rarely successful however, and you should be wary of clients that have let go of a large number of their staff.
Company Innovation is Stagnating
One of the things that every company strives to do is to make sure that they constantly make sure that they innovate to keep the attention of their customers. However, innovation can be slowed to a crawl if they are experiencing financial trouble. This is because they can no longer afford to waste time on trying to create something that may or may not work. Most companies will instead opt to focus on old products and services that have proven to be profitable. This reduces the risk that they are going to be driven deeper into debt.
Lack of New Talent In The Company
This is a combination of the two previous points. New employees tend to be hired to bring something new to the table at the company. In a succeeding company, these newer employees will be the innovators and talent that will be able to push a company further. However, a company experiencing financial troubles will rarely be able to afford these kinds of professionals.
They Start Ignoring You
A common occurrence when a company is starting to go down is the fact that they will start actively ignoring you. They can hear you requesting payments, however if you’re not an essential part of their business then you might as well be shouting into an empty hallway at 1am. The best way to get them to listen to you again is if you get a third party like a lawyer or collections company involved. If you do decide to take this route of dealing with a non-paying client, make sure that you pick a specialized lawyer or collections company as they will have more experience and tools to deal with your specific problem.
Running into financial trouble is a problem that many companies will face sometime in their lifespans. And even if your company isn’t the one directly experiencing it, it’s still a problem for the longevity of your own business. However, if you can identify problem companies quickly, then you can minimize the effect their financial trouble can cause to your own business.