According to a survey by the National Association of Business Economics (NABE), 58% of economists predict there’s more than a 50% chance of a downturn in the next 12 months. If you own a business or lead financial planning or revenue teams, a recession is likely dominating your thoughts and dictating your strategies in 2023. And it’s likely influencing how you allocate your budgets and identify risks you may not have noticed or thought about before. But one thing is for certain – how well you manage your cash flow could strongly affect whether you survive a recession or close your doors for good.
Recession fears have businesses panicking about missed payments.
These fears are warranted given that 85% of North American companies reported being paid late by their customers. Of that 85%, 42% said they get paid late by 11-30% of their customers and another 9% are owed money from over 30% of their customers. As a result, 31% of business leaders said they’ll change their payment terms in a recession.
Despite previous loan defaults, most companies are optimistic about loan approvals.
Our study found that 33% of North American companies have defaulted on loans in the last 12 months. Despite this, a whopping 88% seem to think they’ll get approved for a business loan. This could signal a lack of understanding about what factors lenders take into consideration when approving loans. It could also indicate that businesses are becoming heavily reliant on loans when they run into financial trouble.
Due diligence (or lack of) could be the biggest cause of cash flow problems.
Given how turbulent the economy is right now, you’d think companies would be extra cautious about who they work with and do everything possible to make sure they get paid. But our study found this to be far from the case, with 36% of businesses admitting they sign contracts with new customers without running a business credit check. What’s even worse is that 26% of businesses admitted they either rarely or never run credit checks on their existing customers.
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