As a business leader, avoiding being labelled a ‘risky’ business is a responsibility that lies squarely with you, and unfortunately it doesn’t take much for your business to slump from a healthy position to the ‘danger zone’.
A negative reputation is difficult to shake. Once businesses are thinking twice about working with you or you’re no longer being seen as a worthwhile investment, it can be hard to recover. I’ve gathered together key pieces of advice that can help CEOs ensure they are protected from the pitfalls of risky business.
Keep an eye on invoicing
It seems so obvious, but you might be surprised by how easy it is for a business to slip into poor financial management habits. Below industry average ‘Days Beyond Terms’ (DBT), which is how long a business takes to pay their bills outside of the agreed payment terms, can reflect badly on your company. Before long, you could be viewed as a risk to do business with no matter how well you are performing from a service perspective.
If you do happen to notice an issue with staying on top of your payments, the worst thing you can do is ignore it and hope it goes away – it won’t. You need to be aware of the problems you are facing and work to take back control. Where might you be able to scale back on costs? How might you be able to bring payments to suppliers in line with when you’re being paid by your own customers? Are you doing enough to chase those customers to ensure they are paying promptly? This last question brings me nicely onto my next tip.
Follow the money
The habit of late payments within your organisation can not only earn your business a ‘risky’ label, but can harm your reputation as a business leader too. A late payment culture is rife – our Watchdog Report for the first quarter of 2018 shows that debt owed to businesses in the UK was a staggering £580m higher than in the last quarter of 2017. It could be time to enforce stricter payment terms or add interest for overdue payments. As a leader of your business, you don’t have time to waste chasing up serial offenders for payment, instead of taking care of running the business itself. In addition, pay close attention to admin – something that may seem minor, such as an incorrect purchase order or a billing mistake on an invoice can mean a payment is delayed until next month’s payables.
Think the worst
‘Fail to prepare, prepare to fail’ – all business leaders know how much truth there is to this old saying. You’re so busy running a successful business that you can forget to plan ahead for unforeseen circumstances. What if you lost your largest client tomorrow? Will the feared ‘trade war’ have a negative effect on your business? It’s not much fun to imagine the worst-case scenarios for your business, but it can be a handy exercise to help you put contingency plans in place and eliminate risks beyond your control. A company credit report can provide insight into a company’s financial health and payment track record, which is a powerful tool when assessing their viability as a business partner.
If you’ve already found yourself in a challenging position, don’t worry – it is possible to come back from the brink and get back to running a healthy, respected business. It’s not going to happen overnight, and it will require some work. Creditsafe’s Risk Tracker can also help – it allows you to monitor changes taking place within any business that affects yours – shaking off your ‘risky’ reputation will be a lot easier if you’re working with businesses that are risk-free.
You also need to be brutally honest with yourself about exactly what problems led you to this position. It’s the only way you can avoid history repeating itself, and allow you to implement maintainable processes that will get your head back above water. Be upfront and transparent with customers, businesses you deal with and investors, and even seek some guidance from them – they’ll know better than anyone the pros and cons of working with your business. Take their advice on board, and let them know you’re making changes based on their recommendations and that you’ll be doing things differently going forward.