The thumbnail version:
- COVID has put some businesses under cash flow stress
- How much of your customer base has been affected?
- Bad debts can do serious harm to your business
The full version:
Cash flow was one of the first business casualties early in the pandemic. Governments offset the problem somewhat for small businesses but obviously couldn’t keep up that level of spending as the pandemic dragged on. And the longer the pandemic dragged on the greater the strain on cash flow. And therein lies the problem for every shop—under-strain customers helping themselves to longer credit terms and some not paying at all.
Receivables has always been a difficult aspect of business to manage. COVID has made it more so. Depending upon how you have been managing your receivables during the pandemic, now may be the time to transition to a cash-only or at least a mostly-cash policy. What you have in your favour is that so many cash transactions are conducted online nowadays—it’s becoming a common practice, its a mindset change.
Whenever the topic of receivables comes up, I think of the conversation I had many years ago in pre-e-commerce days with a shop owner who built his business on a cash-only basis; no credit, no receivables. Of course this disqualified him with some customers who absolutely needed credit (in itself a red flag) but his argument was that building a bigger business with a big receivables list is kidding yourself. He argued that he didn’t need the unnecessary stress and risk. No credit. No receivables. No bad debt. Less stress.
It may not be an easy transition, but surely it’s worth considering?