Saturday, May 4, 2013

Risk Management – Don’t Trip Over Your Own Sword

Recently our firm was involved in a small claims court action where the business principal, who signed a personal indemnity, was able to mitigate his liability due to a very common credit granting process.

The original credit application was approved with a credit limit of $5000.00. Over the course of several months, the subject company's orders kept getting larger and the payment history was still acceptable, given their industry.

Months past and the credit limit was now up to $20,000.00. The subject company's major customer began to have financial problems, and the trickle-down effect negatively impacted the subject company and consequently his trade suppliers, including our client.

The subject company eventually closed down; however we were able to ascertain that the business principal, who signed the indemnity, had sufficient assets to satisfy the claim. The business principal was not willing to negotiate, so our client sued. During the hearing, the business principals lawyer argued that his clients liability should not exceed the originally approved credit limit of $5000.00 and the judge agreed.

The take away - have your credit department regularly update your customer records and ensure that all limits are acknowledged in writing.

3 Rules for Making a Company Great

This month I’m going to borrow some content from an article I read in the Harvard Business Review. The authors are Michael E. Raynor and Mumtaz Ahmed.

In my opinion, I found this article mentioned several salient points with respect to corporate health and profitability as well as its ability to perhaps assist companies that struggle with development of a succinct Vision that all staff can clearly understand.

Our firm collects from many corporate entities throughout the world, and if these companies would have focused more on the 3 Rules, they would have been in much better financial health. Click Here for the full article.