Recently, one of my Industry Credit Groups experienced 3 bankruptcies in less than 48 hours. One of these was an East Coast account that only 2 members were selling with minimal exposure so their losses were small. The other 2 were long-established accounts.
Since I always preach that the 1st alert posted should never be the BK notice, I decided to do some research to see if my words had made an impact. Over the last 5 months, the following alerts were posted on one of the BK accounts:
1. 5 months ago: slowing, now 60-90, $32K past due
2. 4 months ago: customer states they are waiting for Bank Loan
3. 3.5 months ago: customer not returning calls, changed to cod
4. 2 months ago: placed for collection, have personnel guarantee
5. This week: company filed chapter 11,
The alerts must have worked because the anscers report over that period of time showed the other suppliers reacting to these postings and dramatically reducing their exposure.
Group members were given advanced warning on the second BK with postings such as a Mechanics Lien filed, shop account closed, contractor removed from job. Again, you could see the exposure trending down over that period as members reacted to the alerts.
Years ago, group members were mailed pink reports every 2 weeks listing the NSF checks and other pertinent news. It seemed efficient then. Today, the group can be notified in seconds of any problem with a customer.
The only flaw in the system is that members must be pro-active. Most groups have a small but dedicated group of individuals that seem to provide 90% of the alerts. To prevent losses, you need every member looking for opportunities to report a change in payment habits. Encourage your group to utilize this service.
Somewhere, there is an alert waiting to be posted that will save your company $$$$ and help you manage risk. Let’s be sure you see it.
Lead Group Facilitator