Imagine you own a small manufacturing business. For years, your largest customer has been a reliable partner, always paying their bills on time. The amount of business they do with you has continued to grow, and they now account for about a quarter of your monthly revenue.
Because of this relationship, when you get a call asking for a slight extension on their latest invoice, you agree. However, unknown to you, this customer has been struggling financially for months, racking up debt and facing legal challenges that threaten their stability. By the time these financial troubles become public, they owe you a significant sum, but they have filed for bankruptcy. Payments stop, and suddenly, you are the one struggling to pay your suppliers or employees.
It is a bad situation all around and, unfortunately, not uncommon. The Small Business Administration (SBA) reports that about a million businesses close their doors permanently each year.
What can you do to protect yourself and avoid situations like this one? Account monitoring tools can watch over your customers, providing an early warning of trouble ahead.
Account Tracking Software and Alerting Tools
Account monitoring tools can keep track of your key clients or customers. Unlike a business credit report which provides a snapshot of a company’s financial health at a particular point in time, account tracking software provides continuous assessment.
When you sign up for an account monitoring service, you get:
- Regular updates on business credit scores
- Tracking of payment patterns and delinquencies
- Monitoring of financial health indicators
- Reporting on public filings, including bankruptcies, liens, or adverse judgments
Account monitoring can provide proactive alerts, automatically notifying you when there has been a substantive change in an area that could indicate financial stress. This empowers you to act sooner to protect your business interests.
Account tracking software can significantly lower your risk.
Protecting Your Business
The need for account monitoring has escalated over the past year. A variety of circumstances have impacted the overall economy and created a wide-ranging impact across numerous industries.
Changing Consumer Behavior
Consumer spending is projected to decrease in 2024 as inflationary pricing and concerns about the economy remain high. Changing behavior is impacting many businesses’ bottom lines.
Rising Financial Fraud
Nearly 70% of businesses report that fraud losses have increased in recent years, including business identity fraud, payment fraud, or other types of fraud that can put businesses at risk.
Increasing Delinquencies
Federal Reserve tracking shows an increase in payments beyond term, and there are other concerning signs: 43% of small businesses were unable to pay their rent in full in Q1 2024. Commercial mortgage delinquencies have increased, too, according to the Mortgage Bankers Association.
While small business owners, in general, are optimistic about the future, you cannot take optimism to the bank when it’s time to pay your bills.
Supply Chain Hurdles
We got a glimpse at how quickly supply chain disruptions can impact business over the past few years. Complex, interconnected supply chains are only as strong as their weakest link. If one supplier in the chain is struggling financially, it can have a downstream impact on a large number of businesses. Companies may not get the raw materials they need or goods for sale, causing them to miss revenue targets.
The Benefits of Account Monitoring
By implementing account monitoring tools with a company like Command Credit, you can help protect your business from uncertainty. Account tracking software produces several benefits, including:
- Early risk detection: By identifying potential issues early, businesses can take preemptive action to mitigate risks.
- Improved cash flow management: Understanding customer payment patterns helps in better forecasting and managing cash flow.
- Enhanced credit decision-making: Continuous monitoring provides data-driven insights for credit limit adjustments and term negotiations.
- Strengthened customer relationships: Proactive communication based on monitoring insights can lead to more transparent and collaborative relationships.
- Reduced bad debt: Early intervention can significantly reduce the likelihood and impact of customer defaults.
- Competitive advantage: Businesses with effective monitoring systems can make more informed decisions, outperforming competitors who lack such insights.
In short, the right account monitoring solutions can safeguard your cash flow and give you an early warning of potential problems. Ongoing monitoring of your client or customer accounts can protect your business and ensure your credit portfolio aligns with your risk tolerance.
Get a demo of account monitoring tools, including business credit reports, alerting, and credit portfolio scoring, by getting in touch with the business credit experts at Command Credit today.