9+ Tips Business Professionals Need to Know to Avoid Financial Crises

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Financial crises occur when financial assets and instruments reduce or decline significantly in value. Businesses have trouble meeting their financial guidelines and institutions. Regardless of your profession, if you are in business, these could happen:

  • Clients request services for which they cannot pay.
  • You provide services and then struggle to obtain payment.
  • Slow payers strange your cash flow.
  • Payment issues poison your relationships with clients.

It doesn’t have to be that way! How you engage a client relationship at the outset of the relationship, to a great degree, dictates what will occur in the relationship. In addition, it dictates how resolutions will come about when there are payment challenges.

This key delves into some of the aspects that you can control to insure you and your clients do not end up in a negative situation as a result of their inability to compensate you for your services.

1. Know with whom you are dealing.

You can avoid financial chaos by not dealing with some people and/or organizations. Just because someone wants to conduct business with you, doesn’t mean they are a fit for your business.

If they admit to having financial challenges during your initial meeting, you should consider the benefits of doing business with them and the potential hardship that such actions may have on your business.

2. Weigh the current financial situation of your business.

You can weigh the current financial situation of your business associate and assess the probability that there may be a future ‘payment’ issue.

If it appears that such a situation may loom, install ‘safe guards’ (i.e. collecting more funds up front, keeping the client on a shorter time payment leash, keeping a watchful eye on the fact that there may be payment issues associated with the account and pounce the moment such issues become prevalent).

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In essence, ask yourself if you have the willpower, staying power, and firepower (resources) to chase a debtor.

3. Establish reports.

Once you have assessed the potential risk of financial default, and you decide to engage in a business relationship with the person, create a mutual relationship built on trust, respect, and the fact that you need to have funds to keep your business running.

Set the expectation at the outset of the relationship that you expect your business associate to be a good payer. In creating, a genuine bond with your client, don’t allow the client’s financial problems to instill financial chaos into your business.

In essence, don’t inject empathy into the relationship when the client begins to tell you their financial tales of woe. During such times, you are setting the course for the relationship and how interactions will occur. Set the stage appropriately.

4. Recognise excuses.

When some clients are on the verge of experiencing financial challenges, they may begin to hoard resources in an attempt to sustain their livelihood.

It’s at the point that you must become insistent about receiving payment and putting a process in place to monitor future payments. Do not be caught up in giving more services with the thought that if you do not, it will hasten the demise of your client’s operations.

5. Discover body language (nonverbal communication).

It is very important to discover body language reading techniques. By possessing the ability to read body language, in person and over the phone, you can gain insights into thoughts that a client may not verbally disclose.

Such insight will allow you to have a better glimpse into the real situation with which they may be dealing. If you observe the body language behavior of the other negotiator, you will glimpse his inner demeanor.

If you are astute at doing so, you will be able to observe the escalation of his anger quotient before it reaches a point of confrontation. Just be mindful to practice equilibrium in the process.

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6. Use negotiation strategies.

You can employ numerous negotiation strategies to counter strategies that a client might present in addressing his payment situation; the more strategies you are aware of, and how to use them in the appropriate situations, the better positioned you will be to thwart the actions of a client that may have funds but wish to apply them for other purposes.

7. Identify points to avoid financial chaos.

You can identify points upon which you can apply leverage and avoid financial chaos.

As you progress in the relationship with your client, be attuned to opportunities where you may be able to apply points of pressure, should a lack of payment situation make such actions necessary. (e.g. if the client doesn’t want everyone to know they have a payment situation, you may consider informing him that it is your responsibility to report such occurrences.)

8. Offer a promotion.

You can offer a promotion that gives the client a payback bonus (rebate), at the end of a specified period.

The rebate becomes effective if the client submits funds, in the manner specified by the agreement (note: this becomes a cost of doing business which gets incorporated in your overall pricing).

9. Watch temper to preserve credibility.

When you negotiate, do you find yourself becoming angered by certain positions adopted by those with whom you are negotiating?

In such situations, you have to watch your temper to maintain your credibility in the negotiation. By displaying anger during a negotiation, you can lose credibility.

If you find yourself in such situations, try a few of the following suggestions to free your mind preserve your credibility, and maintain the path that you have set for the negotiation.

Client relations can be strained when payments issue arise, which could cause your business to incur financial hardships. To avoid such situations, choose your clients the way you would choose your friends.

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Always keep in mind that a certain amount of business will go bad. Thus, the better you manage the potential for bad clients, the more enhanced your bottom line will become… and everything will be right with the world. Remember, you are always negotiating.

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