1. Inertia is a dangerous thing in business. Particularly in testing economic times.
These are worrying times for leaders of SMEs.
Following political events, such as Brexit and the election, uncertainty is the word on everyone’s lips which makes things trickier for businesses keen to accelerate their growth.
According to the Association of British Insurers claims against credit insurance are on the rise.
For example, claims recorded in 2016 are almost as high as those in the 2008-2009 recession.
Credit insurance protects businesses if their customers are unable to pay due to insolvency and protracted default on invoices so an increase in claims suggests it is becoming more difficult to be paid.
Businesses with credit insurance can rest assured that typically, claims pay out 90% of the invoiced total, providing business leaders with the confidence to be bold and opportunistic when it comes to working with new or risky customers.
2. Are you more likely to regret something you did, or something you didn’t do?
Several scientific studies state regret based on things you didn’t do will linger longer, as the pain of lost opportunities hurts more long term.
A study called The Consequences of Doing Nothing: Inaction Inertia as Avoidance of Anticipated Counterfactual Regret by The American Psychology Association, tells us that just one lingering ‘shoulda-woulda-coulda’ can have a negative effect on all future decision making.
“When an attractive action opportunity has been forgone, individuals tend to decline a substantially less attractive current opportunity in the same action domain, even though, in an absolute sense, it still has positive value.”
3. Secret global league tables of trustworthy good payers means no wasted sales efforts
What if you could have access to global rankings to see whether businesses pay bills on time?
You could use them to power your sales planning.
This would mean there wouldn’t be any wasted efforts by your sales team. They would only contact pre-vetted businesses you know are good prospects. Credit analysts have access to a secret world of management information and have up-to-date knowledge about businesses in all industries. Analysts are expensive to hire, but included in the service of some credit insurance providers.
4. How’s your mettle for risk?
Do you focus enough on reward? Often the opportunities that appear riskier on paper are the most lucrative.
For example, venturing into different markets. According to the World Bank, many Middle Eastern countries are reporting economic growth significantly above the UK and Eurozone.
But debts are harder to chase, and companies can disappear off the face of the earth when the bill comes in. Would you go for it?
Similarly, working with other SMEs presents a degree of risk.
In the UK, SMEs are only required to publish a balance sheet, allowing just 30% of the insight needed to make an informed decision. Ideally you need the balance sheet, Profit & Loss accounts and cash flow information to make an informed decision.
Things are not always what they seem, particularly when you don’t have all the information at hand. Sometimes, a company can look shaky from studying the balance sheet alone.
However, this could be because it is a lifestyle business, and the owner has paid themselves a large dividend.
On the other hand, you might tighten your credit terms with a prospective customer when you need not.
For example, if you saw a prospect’s share price falling in the newspaper, you might assume you should demand payment up front.
This could result in losing that customer to a competitor that is offering credit terms, thus missing out on a deal with a company that would have paid on time.
Source:  Orit E. Tykocinski, Ben Gurion University and Thane S. Pittman, Gettysburg College, The consequences of doing nothing