How to Prepare Your Business for the Second Lockdown

 

As Ontario faces another lockdown on Boxing Day, businesses have a short period of time to prepare for the financial health of their operations and for the wellbeing of employees. While the lockdown is certainly going to be financially taxing on many SME's, the silver lining is that this is not the first time businesses have been through the challenges of either closing completely or operating with restrictions in place. 

If you haven't already, now is the time to lean on your experience over the last year to ensure that you are as prepared as possible for the second lockdown. Here are five tips to help you do just that:

1. Look back at your response to the first lockdown

A successful business is introspective. It's important to look at what went well, and what didn't during the first lockdown and make changes accordingly this time around. Keep in mind that what went well from your perspective may differ from others. Take the time to talk to your employees, partners, suppliers, vendors, and customers to talk about what worked and what you should do differently.

2. Expect and anticipate shipping delays

There have been more shipping delays than usual this time of year because of increased online holiday orders as consumers bunker down and stay home. That may mean that essential business goods or shipments out to customers are taking longer to arrive.

Be patient and remember that essential workers in the shipping and trucking industries are working harder and putting in extra shifts and long days. Despite their efforts many companies are still struggling to keep up with demand and make deliveries on time.

From delivering essential food items to the COVID-19 vaccine, those in the trucking and freight industries are giving up time with their own families and putting themselves at risk. This essential and thankless job is keeping Canadians fed, comfortable and secure and allowing business in Canada to continue. The best way to deal with these delays is to know the reality of the situation and place orders well in advance of when you need them.

3. Identify bottlenecks

Procuring and delivering goods may be one bottleneck to deal with during lockdown, but are there others? Common bottlenecks that can put your business at risk include staffing and cash flow.

Are you ready to cover shifts of employees who may be unable to come to work because they've got symptoms or are waiting for a COVID test result? Have a plan in place and trained staff on standby just in case.

4. Get Your Finances in Order

Many businesses across the country have been relying on government subsidies and programs to continue to operate. That may help you get through the lockdown, but it's not a long-term strategy. For businesses with reduced hours (or those who will be closed), take advantage of the time afforded you and get your finances in order. In an article for the Chartered Professional Accountants of Canada, business consultant Eitan Dehtiar suggests that businesses "look at an overall cost reduction plan, trying to transition as many fixed costs as you can to variable costs so that you have the ability to turn off the tap and adjust."

In addition to reducing costs, advice from EY (formally Ernst & Young) includes evaluating short-term liquidity and closely monitoring cash flow to stay on top of potential shortfalls.

5. Remember, Cash is Always King

Cash flow is always critical to the health of a business, but even when business is good, if customers don't pay what's owed, things can go sideways. Even businesses that have never missed a payment with their bank, like Carl Gatt, owner of BLB Transport Group, may be denied credit when it's needed.

Earlier this month, FreightWaves interviewed Gatt, who shut his trucking business down after a financing dispute with his lender, RBC Bank. Gatt, who is planning on retiring, ended up paying his drivers from his own personal savings after his business accounts were shut down as the dispute went to court.

Luckily for Gatt's drivers, RBC Bank and the courts agreed that he could sell his business to Ready Go, who agreed to buy the company's assets and hire most of Gatt's employees. "When I met Carl, I saw how much he cared about his employees," Ready Go owner and General Manager Ajay Virk told FreightWaves, adding that "we didn't want to see these guys losing their jobs."

While Gatt's story ended on a somewhat happy note, this isn't always the case. Now, more than ever, it's important to get a hold of your cash flow, ensure your accounts receivable are up-to-date, and have a plan should any government programs or subsidies you're using disappear.

Relying on your bank for credit is risky. Instead, consider invoice factoring as a safer way to ensure your expenses are covered. With invoice factoring you'll get paid instantly for your invoices so you can pay your employees and cover expenses. Give the team at J D Factors a call to learn more. Our contactless process means we're able to help your company get control of your cash flow, even during the lockdown.

 

 

 

How to Reduce the Risk of Your Accounts Receivable

There’s always some risk to your accounts receivable. You’ve performed the work and sent your invoice, but will they pay you? Not always.  

Depending on the size of your contracts and how often your clients fail to pay, your business could face some serious liabilities. Some businesses even declare bankruptcy after taking on a string of bad clients.

There are ways to reduce the risk of your accounts receivable. Business owners may turn to accounts receivable insurance or non-recourse factoring to find compensation for those clients who can’t pay. Which option is better for you?

Accounts Receivable Insurance

For a premium, accounts receivable insurance offers you protection from damages you incur from unpaid invoices. If you have to hire a collection service your insurance policy may cover the cost. Or, if you have to take out a loan in order to make up the gap for an unpaid invoice, your policy may cover the interest on the loan. This insurance is also useful if a disaster or technological failure has caused you to lose track of your account receivable records causing you to be unable to collect.

Just like other insurance policies, your accounts receivable insurance will have a policy limit. If you have large invoices you may need to pay high premiums in order to get them covered. Further, your premium rates will go up if you need to use the insurance. There’s also the chance that the insurance company will find a reason to deny your claim.

Non-Recourse Factoring

Non-recourse factoring, on the other hand offers more benefits and less risks. How does factoring work? You send your invoices to the factoring company and they send you the cash, minus their fee. At J D Factors we send you the cash owed you within 24 hours. With us, you have your money without worrying about hiring a collections company or taking out a loan to cover your losses.

You’re paid, but what about your clients? The factoring company collects from your clients directly. With non-recourse factoring, if your client never pays because of a credit issue such a bankruptcy, the factoring company takes the loss for you. That’s much more convenient and easier to plan around than trying to make an insurance claim only after your client has refused to pay.

For this reason, non-recourse factoring helps businesses keep a healthy cash flow and a more flexible business model that is able to invest or expand when needed.

Benefits to Insurance Brokers

If you’re an insurance broker, why would you mention non-recourse factoring to your clients? Not all of the contacts you have will end up choosing accounts receivable insurance. However, you can still make money on these contacts for whom accounts receivable insurance isn’t a good fit. Simply refer them to J D Factors for non-recourse factoring. We’ll give you a referral fee. Plus, if you can offer your clients the solutions their business needs, you’ll earn their trust, they’ll stay with you for all their insurance needs, and they’ll refer you to their peers. Talk about a win-win-win!

Contact J D Factors today to learn how to reduce the risk of your account receivables with non-recourse factoring for yourself or a client.

Bankers Use J D Factors as a Short Term Solution for High Risk Clients

As a financial institution, are you serving your small and medium sized business customers as well as you can? How many potential customers are you turning away because they don’t qualify for financing? The solution isn’t to lower your standards, but to help businesses qualify for your services. You need a short-term solution that can get your potential business customers on the right path.

Factoring may be part of that solution. Factoring can give your clients the healthy cash flow they need to improve their credit, pay down their debt, and eventually qualify for your financing or other products. Everyone benefits: your small and medium business clients get the financial support they need, and you gain a new client who is grateful for the past assistance you provided.

How Factoring Helps Your Clients

Do you find you have clients that you’d love to help, but their credit score, debt, or other aspect of their business disqualifies them? You can still help these clients by pointing them to another option: accounts receivable financing, or factoring.

With factoring, your clients will receive the money they invoice for immediately. This can help them build a positive, healthy cash flow they need to make the investments required to support hypergrowth or otherwise improve their business.

J D Factors goes a step further and offers non-recourse factoring. This means that we take on the risk of bad debt and don’t demand money back from our clients, even if their customers never pay. So, if you have a potential client whose financial troubles are partly due to their unreliable customers, non-recourse factoring can help them eliminate that risk and start to recover.

How Suggesting Factoring Helps You

As a bank or financial institution, your loans will always be in demand. It’s just a question of whether those who want your financing are eligible for it. Factoring is the perfect way for you to help new clients qualify for your services.

Factoring doesn’t have to compete with bank loans. Chances are, the clients you send J D Factors will continue to use factoring until they are ready and qualify for traditional financing with your organization.

You should also recommend factoring to your clients because when you show your potential clients that they have other options, they trust you. You demonstrate that you care about their business, even if you can’t help them right now. That makes them much more likely to return to you when their business is in a position to take on a loan.

Further, when you send clients to J D Factors, we can give you a referral payment. If the customer you send us doesn’t work with you again, you’ll have earned something for your time helping them.

Contact J D Factors to learn more about how we can partner together, to strengthen small and medium sized businesses across Canada.