Do you see the Danger?
- Elevate Global Insurance
- Mar 19
- 2 min read
Several factors can lead to a company's downfall. Signs along the path include declining sales, high debt, rising costs, and cash flow issues but one key red flag you can watch for that could signal financial distress with a customer is irregular payment practices.
According to a study by Creditsafe, 86% of respondents acknowledged that frequent late payments over a 12-month period can increase the likelihood of a customer going out of business. Even though historical data shows that changes in payment patterns often precede bankruptcy, surprisingly only 3% of businesses effectively spot these warning signs.
Why?
Of the companies who were surveyed, 61% indicated they don’t always analyze the historical trade payments and late payment trends of their potential customers before embarking on a trade relationship. The lure of revenue often distracts companies from due diligence activities though this can leave them open to a number of challenges down the road such as chasing customers for late payments and suffering bad debt losses.
Late payments on invoiced sales can be a serious drain on a company’s monthly cashflow and it is a common issue for many companies. 86% of companies asked indicated that upwards of 30% of their monthly invoiced sales are overdue while 66% of the respondents said they typically wait for overdue payments from customers – totalling up to $70,000 each month.
The study also shows that approximately one-third of businesses (32%) see bad debt eating between 5% and 30% of their annual revenue with 16% facing bad debt losses affecting 5-10% of their revenue while 11- 30% of revenue is lost to bad debt by the other 16%.
Do any of these stats look familiar? Do you need help with financial due diligence? A trade credit insurance policy can alleviate these issues. Let me tell you how.
Mark Hall
416-526-6548
416 526 6548
416 526 6548
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