Credit Control but not as we know it

There are many ways we can seek to reduce loss as a result of clients not paying, ranging from monies in advance, credit agency checks and personal knowledge from past transactions.

In any event it is unlikely to be catastrophic to your business if one client defaults. Provided that is, you have kept some sort of control on granting credit, done periodic interim bills and avoided having too many eggs in one basket the effect should be contained.

What would happen however if one of your key suppliers failed? Who are your key suppliers and how dependent are you on them? How would your business be affected if your key practice or case management supplier failed? How can you minimise the risks to your business?

The first step is to identify who are your key suppliers and do credit checks on them, if possible, before you enter into a dependent relationship. Fewer than 1 in 10 potential customers ask to see their suppliers’ accounts. Ask the important questions now; it is a lot better to find out the risks before you become dependent rather than afterwards.

Is the current incarnation of your potential supplier the one that has been around for 25 years or a more recent “phoenix”?

Periodically review your suppliers in the same way to identify potential risks and look for safeguards where possible. Clearly there is a need for some judgement on how far down to take this process. It would not be a disaster if your water cooler supplier failed but it could be if case management supplier failed.

Ensure that a copy of the software is kept in escrow and available to you in the event of their failure, although this is really a last resort and should be considered as a way of bolting the stable door after the horse has bolted. Remember that should you need to call on the escrow copy you still need people who understand it to become useful to you.

Much more important check before you buy and know who you are planning to deal with before it’s too late.