Strengthening the Financial Foundation of Your Business in the New Year

January 20, 2016

By Francesca Macchiaverna

Special to Business in Savannah

January is an important time to set goals, finalize budgets, and strategize for the year ahead. The new year also presents an opportunity for you to reach out to clients/customers and wish them well in 2016. In addition to forging a meaningful connection beyond typical sales calls, this kind of call also presents an opportunity to check in on the financial aspects of the business relationship and open a discussion about how to keep it healthy.

The economy is improving, and investment will be key to growing businesses. However, small businesses may choose to expand at first using credit instead of more formal financing options. Additionally, both consumers and businesses are prone to experiencing a “holiday financial hangover.” For clients/customers needing short-term capital to grow and those needing relief from existing payment obligations, an extra ten to thirty days to pay a bill can make a big difference. This is a good time for you to find out how your clients’/customers’ businesses are faring, evaluate how that might affect your accounts receivable, and consider offering certain clients/customers an extension of credit.

Offering to extend a line of credit to qualified, existing customers has the benefit of helping them bridge the gap and support their long-term success, but it is also an opportunity to formalize a credit relationship (if one does not already exist) and obtain a personal guarantee to assure repayment of the credit extended.

In a community where business is often conducted on a handshake or a pay-as-you-go basis, you may find your business has no leverage when it comes to collecting debts. There are countless cases where neither a credit application nor a personal guarantee was established at the beginning of a business relationship, and when a client’s business failed, creditors had little recourse to collect on the debt. A credit application and personal guarantee by a principal are important steps to safeguard credit that has been extended.

A qualified professional can help create a credit application and personal guarantee specific to your company, business, or industry. These practices can protect your business while also supporting your clients’/customers’ businesses and goals.

Although the offer to establish a line of credit is particularly ideal for established customers who have been good clients under existing business agreements, it is also a viable option for those who might have caused concern about meeting payment deadlines in the past. Of course a financial discussion may reveal that a given client or customer is not a good candidate for credit, knowledge that may require different action. It is also important to consider the cash flow of your own business when extending this offer to clients in order to avoid stretching finances too thin during the admittedly tight post-holiday period.

Whether or not clients are interested in establishing credit, it is still beneficial to extend the offer. Your customers will be aware that credit is an option, and now that the topic has been gracefully broached, can consider it in the future. Simply opening the dialogue creates synergy and can strengthen the bond with clients and customers. Lastly, better credit practices will create a stronger financial base for your business and create a foundation for growth in the new year.

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