As part of your new business process, there should be a function to validate how much credit is appropriate to extend to a customer, and these limits should be adhered to and regularly reviewed. It often seems counterintuitive to walk away from potential revenue, however it is vitally important that businesses extend appropriate credit to the businesses that they work with. This is the age-old argument between sales and risk, where the sales function hopes and seeks to squeeze every drop of revenue from a lead, and the risk function needs that credit to be appropriate. There is usually a chasm between what a business wants to extend in terms of credit to their customer, and what they should extend to them.
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Don’t forget, maintaining a bad debt reserve is only as effective as the calculations that have been used, plus that money cannot be invested into expansion and growth either at this point it is worth businesses considering a credit insurance policy, which will provide an appropriate level of cover, restore most losses and free up your provision for investment elsewhere. This will assure that regardless of whether a single large creditor goes bust, or a couple of smaller ones do, the business will still be able to survive in the short-term, if not thrive. Instead, businesses should consider how much they can afford to lose before they will no longer be able to continue as a business, and implement this as their bad debt reserve. If any business was to review its historic business profile, number and type of customers, spread of risk etc., it is unlikely that two years will ever be identical add to that the fact that no two bad debts are the same, and allocating a reserve on this basis seems very naïve. Very few businesses we consult with have ever reviewed what provision they actually need in order to survive, which is a common mistake that can leave you vulnerable. Most commonly, bad debt reserves are calculated and set aside by reviewing historic bad debt and adding an additional contingency, with risk is evaluated based on past events. Review bad debt provision, particularly if it is a bad debt cash reserve within the business.If nothing else, it should encourage you to review your business profile and credit management processes to ensure that you could weather this type of extensive crisis. Whether it affected you directly or not, Carillion is one of the largest and most high-profile insolvency cases in recent history, and businesses would be naïve to ignore the lessons which can be learned from its impact on other businesses. This domino is likely to continue as businesses fail, or possibly scrape through the losses they will have suffered. One such business is CCP, who went from a stable, highly profitable business with a large turnover, straight into insolvency, almost overnight, as the business failed to weather the loss of income from the Carillion insolvency. In fact, the story of Carillion is just the tip of the iceberg, with a further number of businesses entering insolvency as a direct result of their credit terms with Carillion. Call us today at (800)-297-7009 to maximize the value of your assets and get you the highest return on capital invested.You’d have been hard pressed to ignore news that construction giant Carillion has entered liquidation, but you’d be forgiven for not monitoring its immediate impacts very closely. San Diego Liquidation LLC uses real-time data analytics, direct-sales, and marketing approaches to maximizes the value of your depreciating assets. San Diego Liquidation LLC is not a liquidation firm, liquidator, nor auction house. Oftentimes businesses in transition have business needs and goals that must be met which may include short move windows, using a cash flow position to purchase new assets and equipment, or freeing up valuable space. offers an end-to-end asset management service to help your business transition. Looking for a Cash Flow Position For Your Business Assets?
Using a vast network of sales channels, we use direct sales, exporting and internet auctions to get the highest net return for your inventory in the shortest period of time. Upsizing, Downsizing, Relocating, Closing, Renovating? Our sales methods maintain complete discretion for your business. We evaluate each asset and determine the sales channel that will result in the highest net return and turn your assets into cash. We offer a formal appraisal and purchase of your assets for immediate cash or can use direct sales channels to get the highest value for your inventory on a commission basis. LLC., we specialize in helping your business consolidate inventory and excess business assets.