Bankruptcy Notice - Read Immediately

SCENARIO
Stepping into a situation where a customer files bankruptcy and you take the lead
Bankruptcy notices are something we never want to get from a customer and we definitely do not want to receive a notice from a customer who owes us money…This week I wanted to touch on how I navigated a scenario I stepped into at a previous employer and how I can help you avoid going through this scenario.

If you find yourself in this position currently, reach out and I can help you get through things smoothly. Make sure you take action now and do not wait as you may miss a deadline to be able to recoup funds owed to your business. While I’m not a legal expert, this is one area I had to get very familiar with to run the full process start to finish.

Key things to do if you run into a customer filing bankruptcy 👇

1. Place customer on hold, notify shipping, and stop the bleeding quickly.

2. Analyze any contractual obligations on shipments and if you can cut off.

3. Research customer status and file a proof of claim as soon as possible.

4. Move to Net0/Prepay terms and adjust credit limit to $0.

5. Notify any sales/management immediately for communication line.

6. Ask customer for official notice/documents for record and filing details.

7. Keep up to date on any filing status changes and POC deadlines.
   

MONTHLY RECAP
Here’s our April recap included in this week’s newsletter vs sending you 2 emails!

This month I am hoping to connect with someone more on the Fractional Sales side of things and discuss $$ and how that works for your business. Do you know someone I can chat with or who you’d recommend?

TEAM ACTION PLAN
Here’s how I adjusted my team’s approach on analysis and collections
Before I stepped into this leadership role, I was told they were having some issues being able to collect timely, follow processes/procedures, and were going through some very late paying customers driving bad debt. Totally ok and something I’ve seen a bunch over the years or been asked to help resolve.

These are some things you and your team can do now to make sure you avoid any collections/bankruptcy issues within your business.

1. Conduct in-depth analysis across all open customers with a balance. Primarily you are looking for late payers, 90+ balances unresolved, unresponsive customers with large balances due, etc. and then you are going to rank these as low, medium, or high risk. Remember, when invoices get to 120 days or greater statistically your odds to collect that balance drop drastically.

2. Medium and High risk customers should be discussed internally with your team and your sales group on next steps (i.e. credit hold, shipment hold, interest charges, demand letter, legal letter, etc.)

3. Team training is crucial. Your team needs to understand how to collect and what red flags to look for to be successful. We offer services specifically related to help your team in this area. Invest here.

4. Set non-negotiable credit policies that MUST be followed by your business and all employees. No work arounds here. When you make exceptions, this is when you will end up in a bad debt scenario.

5. Develop a bankruptcy plan so your team knows what to do in case there’s a situation that arises and can take immediate action.

6. Conduct monthly analysis and quarterly reviews across all customers with an open balance to determine if escalation is needed. Furthermore, you need to inactivate any other customers with a $0 balance with no current sales which will prompt you/your team to conduct analysis before shipping again if that time comes.

7. Proactiveness. I preach this everywhere I go. You have to be proactive on your AR in order to avoid these situations.

8. Many times you run into road blocks with those outside of your AR group causing very long delays to resolving issues. Do all you can from your end to document and show that you are following the process and pushing to get resolution. Escalate as needed.
   

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There’s a ton more we could chat about today on bankruptcy and how to handle, but every situation will be different. States have different legal processes, contracts come into play, etc. which may adjust how you have to approach this if it ever were to arise.

Hopefully you do not deal with a bankrupt customer, but if you take a proactive approach like mentioned above you are putting yourself in a far better position to NOT have to deal with it. Things happen though and I’ll be here to help you through that process if you have questions.