Challenges to Survival

Les Mitchell

We all see that the credit crisis is still a very prominent topic in the media, with the ever-changing policies and procedures and non-stop reorganizing within corporate structures of the financial industry.

Many lenders claim to be lending. It has become apparent that the difficulty in obtaining approval is just one of those challenges many companies face in order to sell products to customers. The appetite for investors to invest in lending has become much more conservative, and many appear to be holding onto capital to help offset future predictable losses.

Although the ability to obtain credit is still available, it has become more difficult to execute the approval process and complete the funding of loans. Ensuring your company has strategies in place to better understand if your customer’s credit worthiness will meet the needs of the lender will be key in your ability to keep product moving. Prescreening potential customers has become part of the sales environment.

Using the prescreening process on potential customers can minimize time spent on candidates that simply will not meet the lenders’ requirements. Who is the ideal candidate? Stable employment would be a great place to start, possibly a homeowner and someone with a good credit score. Sadly, most households earning less than $40,000 per year do not qualify for as much these days as in the past.

Now, with all these raised levels related to credit approval, we may need to review internal credit management and procedures within our own organizations. The possibility of potential fraud and identity theft can increase during such times and in order to limit your exposure to these risks, there is no better time to review your internal credit procedures. Enable your staff with the proper tools and awareness to protect your company from counterfeit money, false applications and potential identity theft.

When reviewing credit applications for approval, it will now be more important to obtain credit references in writing to ensure you can verify them, at the same time ensuring that the company is still active. Make sure to complete a thorough investigation prior to granting any credit and monitor your accounts receivable clients’ activities more frequently.

More importantly, understand that it is unlikely you are the only one extending credit to your clients. Therefore, when your clients’ payments become slower or fail to be made in a timely fashion, it is imperative to ensure that you are on the top of their payables list. Keeping in continuous contact with your clients is a vital function.

Understanding cash flow is also critical to any company. It is important to act sooner, rather than later. Maintain strict policies to handle your accounts receivable and assign files to collections sooner than later to provide you with a competitive edge for recovery over your competitors. If you have secured loans, it is essential to recover them while they still hold value, allowing you to maximize recovery and minimize loss due to depreciation of your security.

Work closely with recovery agents as they tend to be aware of individuals and companies running into cash flow tribulations and may be able to provide sound, directional advice.

Les Mitchell , vice president of Wolfco.Bailiffs, specializes in a wide range of solutions that assist with locating and recovering assets or funds. Mitchell has been in the repossession and collection industry since 1991 and possesses a wide scope of experience in this field. Contact this writer.