The Times, They Are A Changin’…

The Times, they are a changin'

Come gather ’round people

Wherever you roam

And admit that the waters

Around you have grown

And accept it that soon

You’ll be drenched to the bone

If your time to you is worth savin’

Then you better start swimmin’ or you’ll sink like a stone

For the times they are a-changin’

Bob Dylan 1963 (


The Times, They Are A Changin’

The immortal 1st verse of the Bob Dylan classic, “The Times, They Are A Changing”. 2020 has been a monumental year so far, and it certainly feels as if the waters have risen for businesses globally. Seismic shifts have occurred this year and look to continue from what we can see.

Late 2019, the Courier Mail highlighted a worrying trend in the number of company bankruptcies in Australia, yet ,here at the end of the 2020 financial year, we also hear that the number of company failures for the first 6 months of 2020, is significantly down according to many sources. It is fairly well recognised that whilst business conditions and confidence are at record level lows, thus you would expect a significant upward trend in company failures. It is not difficult to understand that one of the reasons for the lack of failures has been the federal Government’s various business stimuli measures.

The term: ”Zombie Companies” has been banded around recently too, meaning that there are lots of companies propped up, still trading when in fact they may be long dead without the stimulus. What does this mean for businesses in Australia (and arguably, globally?).

According to Dynamic Business if not already done so, companies should create a strong debtor and credit process, and ensure that the risk from debtor non payment is minimised and understood.


The full framework can be found here, and originally devised by Greg Charlwood, Bibby Financial Services. There are several areas that are of interest here and relevant to almost all companies and organisations

Client financial health check

How often do you do financial health checks on your clients? With company liquidity levels undoubtedly falling over the past 3-4 months, can you afford not to? We don’t mean checks on irregular, low revenue clients, but regular, highly producing ones.

Even if you do, what does the check consist of..? Requesting a PDF income statement and Balance sheet? If so, ask these questions:

When was the statement / balance date ? If this was anything other than the last month / 3 months then this could be an area for further investigation. Do you also compare for the previous period? What trends are you seeing in this. Yes, agreed, COVID has hit many industries but are the trends in profitability or balance sheet strength sustainable over the life of your contract / service?

What underlying trends are apparent within the statements? Can you assess creditor payment periods easily. How many days on average are they taking to pay their debts..? Is this static, or changing over time? Look for a consistency here. Lack of payment time consistency could be a red flag, and point to an underlying payables / cashflow problem

Assess the relationship between costs and revenue generation. Are these stable and consistent over time? Again, volatile differences could mean poor management or financial management

Generally, when assessing financial statements, look for consistency, or stability of not only headline numbers, but also relational numbers too.

Regular Client Review

We stress regular reviews for a number of reasons, not least, the premise that once the initial client review is completed, follow up checks are rarely done. Here is an example to ponder (I love that word!)

You’re as happy as Larry that you’ve just won that big shiny new client, that will generate significant revenues for you over the next few years. Perfect – and congratulations! You’ve also been very diligent in checking your new client out, their legal structure, their financial structure, their financial statements, their key indicators and there are no debts registered against them that are of concern. Great!

3 months after you have started accepting orders or implementing a new project, suppose your new client suffers a business event? For instance, a major client of theirs has defaulted, or the new line of credit has not materialised due to changes in policy at their lender. Or, an equity raise has not happened, or they are scaling too quickly (over trading)? In fact, any number of business events could have happened – and not only big market shocks such as Covid 19 or Brexit if you are in the UK. You see, client financial risk checks should be a normal part of your business processes. The down side to this is the manpower, and time this may take if normalised within your business.

How can you manage financial risk in your business, if you are not routinely managing your clients and suppliers’ financial risk profile? Fortunately, there are some great tools on the market now that allow you to do this quickly, and highly efficiently, such as our very own Jazoodle.

Recognise Problems Early

There are a number of ways of doing this. Routine client and supplier financial risk checking means ensuring that you are across changes to your clients and suppliers businesses. We’ve already argued that this should not be a static or once off process, but dynamic, and regular. Do you have a process for watching how changes are developing? Changes could be a one off, or blip, but it’s better to be across them than not. Communication is also key here. Discuss what you are finding early with your clients and ask what this may mean for your continued relationship. If for instance, you are seeing their payable period start to lengthen, this is a good conversation starter, in understanding what the cause of this is? Now suppose you see a problem created and continuing with the overall viability of your client’s business, and their business health score moves into worrying territory and stays there..? That may be the time to renegotiate terms, shorten credit periods, a great relationship with your invoice collection company.

COVID-19 has certainly meant that the times, they are a changing. The economic ripples, nee tsunami that has been created may seriously impact your business, your clients, your suppliers. From a client management perspective, we are advocating ensuring that you have both the means and processes by which you can mitigate client financial risk, along with ensuring you are able to react early enough should changes in their risk profile be seen. Our tag line, Insight, not hindsight, perfectly sums this approach up. Isn’t it better to be in front of a potential problem, than regret missing one?


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