Back in 2020, some really weird things began to happen in global supply chains.
With people stuck at home and no one spending money on travel or fancy clothes, online sales boomed like never before.
People just started buying… insane amounts of stuff.
Quite quickly, the ports out of Asia and into North America home became increasingly congested. Ships were waiting longer and longer to get out of port—and again to get in at the other end.
Container freight companies doubled, then tripled their rates, driving costs—and inflation— way up. The port backlogs extended from days to weeks—sometimes months.
And then in March of 2021 a 400-metre-long barge got stuck sideways in the Suez Canal. It had never happened before, and took a week to sort out—and created a jam of 369 container ships that is still causing delays. The Suez Canal mess forced shipments to be rerouted everywhere, and multiplied the queues at ports on the other side of the world.
Businesses of every size were hit hard.
Ford stopped production of F-150s and other vehicles because of semiconductor shortages. Hasbro and Mattel cranked up prices across their toy lines.
Shortages and cost increases began affecting nearly every business. According to Deloitte’s CFO Signals report, supply disruptions have increased costs by 5% or more this year, and 32% said sales have fallen due to delays or shortages.
Even local businesses are being hammered. Microbreweries are paying more for bottles and cans to hold their products—if they can get them at all. Ingredients and raw materials can be hard to find, and costs continue increasing. Most small businesses have seen their margins consumed, and they face painful repercussions every time they need to demand higher prices.
And then there is the other growing shortfall: labour. Labour shortages, talent recruiting and retention, burnout, morale, potential delays in return to work, and rising wages are becoming huge problems for businesses in North America and overseas.
So for anyone doing business in Canada, the recent shutdown of the Port of Vancouver—our country’s very biggest port—after the worst storm in a century left literally all eastbound rail lines and highways washed out and buried by landslides, adds an incomprehensible compounding effect.
With such a massive-scale series of calamities still unfolding, you have to know it will effect your own business, regardless of what sector you work in. Customers up the line are struggling to get materials and staff, and paying much more than expected. Their customers are having trouble making ends meet. As far as you trace it up or down the line, things look bad.
What does it all mean, and what can you do?
If you’re reading this blog post, you are probably facing slower-than-usual receivables.
It’s an important opportunity to consider the risks, and exercise the power you do have. Here are three urgent actions to take:
- For any accounts that are slightly past the due date, get on them. Especially if yours is a small business, which makes you most likely to get stiffed by customers. Take note that you’ve got to be the most aggressive on a struggling customer’s payables list in order to collect. You’re in competition with payroll, the CRA, the bank, secured creditors and other bigger players than you.
- If you experience further delays or identify warning signs like stall tactics, turn the account over to your collection agency immediately, and no later than when it reaches 60 days past due. Don’t get drawn into a waiting game or be fooled by false optimism (all business people are optimists).
- If you don’t have firm policies around how and when to send accounts to collections, put them in place. It is remarkably effective to confidently say “it’s our policy” when telling a customer you will take action on a specific day if payment in full is not received.
It is imperative at times like this (heck, all the time, but ESPECIALLY NOW) that you make your business a top payment priority.
The best part is that updating policies and retraining customers creates lasting improvements. Do it right and not only will you weather this storm, I promise you’ll experience faster-paying customers for the long run.
And that makes your business stronger and more profitable.
