Bankruptcy is an issue that many businesses run into. However, it’s not only an issue for the company going bankrupt. It’s also an issue for all of the people and other businesses they owe. This reason is why you should ensure that you have ways to protect your own business from clients going bankrupt.
What You Can Do To Protect Your Business from Clients Going Bankrupt
You may be wondering how you can protect your business from these types of clients. You’ve come to the right place. There are quite a few ways to safeguard your business from clients going bankrupt. These types of clients will use whatever means they have to get out paying your owed fees so you need to ensure that you have ways to protect your business from them.
Negotiate and Find Solutions With Your Client
One of the best ways to protect your business from clients going bankrupt is to make sure you keep your communication channels open. If they are failing to pay your fees on time, the first thing you should do is contact them. Negotiating with your client could open up new ways for them to find a way to pay you.
It is certainly much better than having to fight a legal battle that could take months or even a year. By that point, they could have already filed for bankruptcy and there isn’t much you can do to collect your fees.
Spot The Early Warning Signs
Many of these businesses never saw the early warning signs that their business is running into it. That doesn’t mean that you should be oblivious to the signs that a client is running into problems. A great early warning tool is checking a client’s credit while working with them. Their credit score is a great indicator of how they’re doing financially. It tells everything from how they’re paying their bills to how they pay their debts.
Keeping an eye on certain clients will save you the grief of having to write off a transaction as a loss later on just because the client went bankrupt. It is especially true for clients who have staffing and recruiting debt. This type of debt is one of the first debts that a client will try to avoid paying. If you see that they’re having trouble with a staffing and recruiting company, then you have to be wary of working with them.
Have an Effective Contract Protecting You
If there’s one thing that you need when dealing with all your clients, it’s a contract. Your contract should be effective when it comes to making sure it protects your interests. As we’ve said earlier, they’ll use whatever means possible to get out of paying your fee. They will use their lawyers to try and pick apart your contract to find loopholes they can exploit.
Make sure the wording is on point and there aren’t any contradictions that could cause problems later. We highly recommend that you have a lawyer take a look at any contract you make, or even have the lawyer draft the contract for you. This ensures that your contract is legally sound.
Have a Paper Trail You Can Follow
A papertrail is an essential part of running a business. It is even more essential when you have to collect from a client that could be facing bankruptcy. A paper trail includes your contract, receipts, and other documents that you have used to deal with them. Make sure that these papers are secured and are ready when you need them. You never know when you might need these papers.
Safeguarding your business from clients at risk of going bankrupt tends to be an afterthought for many. However, it can be a serious threat for your business due to it’s domino effect on you. We hope that these tips and tricks will be able to keep your business protected from these types of clients for many years to come.