13 Ways Small Businesses Can Protect Themselves From Bankrupt Clients
Large Client Bankruptcy: 13 Ways Small Businesses Can Protect Themselves
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Small Business Trends | Originally published
Landing a large client is a major moment for a small business, one that calls for celebration. But later on, if that large client finds itself in financial troubles, problems may arise for all of its associates. As such, a small business that puts too much faith in a single large client may find themselves struggling to stay above water if that client folds or changes direction. To find out what can be done, we asked members of Young Entrepreneur Council (YEC) the following:
Here’s what they had to say:
1. Start Communicating Now
“It’s better to start communicating with clients before the risk of bankruptcy becomes filing for bankruptcy. Build a rapport and speak to the client often. When a person files for bankruptcy, they often have many people to pay. By being assertive and making yourself seen, the client will remember you. It reduces the chances of you getting left out when it’s time for them to pay.” ~ Blair Thomas, eMerchantBroker
2. Have a Plan
“Owning a business means you’re willing to take risks. However, taking risks doesn’t mean you shouldn’t have a plan in case things go south. If you get news about a large client who may be at risk for going bankrupt, consider your options and develop a feasible plan in case they file bankruptcy. ” ~ Syed Balkhi, WPBeginner
3. Actively Market Yourself
“Continually market and seek replacement for that client in case you lose that account. Start looking at ways to reduce costs and move into a lean spending plan to provide more cash flow should you have to go without that client.” ~ Serenity Gibbons, NAACP
4. Nurture Your Sales and Marketing Funnels
“The biggest problem that small companies get into is the “feast and famine” cycle of landing a big client, working that deal, and then having to find a new one once the money runs dry — whether from the project being completed or the client going bankrupt. To protect against this, never let your marketing or sales guards down. Always prospect and market so that the pipeline is always full.” ~ Keith Shields, Designli
5. Manage Your Accounts Receivable
“By the time a major company is struggling with their cash, it’s too late. A startup needs to build an accounts receivable muscle from the early days. Send weekly invoices and follow up for payment regularly. When you get to crunch time with a teetering company, play the startup card (“we actually need this money to stay in business!”) and ask for partial payments to at least collect something.” ~ Aaron Schwartz, Passport
6. Keep Records of Everything
“It’s important to keep a paper trail of all business you conduct through your company with clients. If a larger client is at risk for bankruptcy, one of the best things you can do is have records of all transactions so you’re able to protect yourself in the long run.” ~ Jared Atchison, WPForms
7. Alter Your Payment Terms
“If you know one of your larger clients is on the brink, request to adjust the payment terms of service. Based on the business, particularly if it is service-based, make the switch to a pay-upfront model to ensure that any services rendered after the concern of financial unrest have been communicated are compensated for. This enables you to still provide for the business while protecting yourself.” ~ Jared Weitz, United Capital Source Inc.
8. Get Your Accounts Settled ASAP
“We had a similar issue with a retailer that was possibly going bankrupt and was pushing off payments to us. Instead of waiting around for the inevitable, we got very proactive and pushed them to the point of hiring a collections agency to get it for us. Because of this we got our money, but many others probably won’t. Always get your money ASAP if it’s owed to you…[MORE]
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To read the entire article, visit the Small Business Trends website: Large Client Bankruptcy: 13 Ways Small Businesses Can Protect Themselves