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“Small businesses can’t survive if they can’t get customers to pay bills,” says Edgar Ortiz, president and CEO of Strategic Analytic Solutions, an Atlanta-based management consulting firm, a guest columnist for the Atlanta Journal and Constitution this past weekend.
I read that, and maybe because of the recent success of the New Orleans Saints, I immediately thought of an expression I heard quite often in the three years I lived in New Orleans, “For True!”
Ortiz opines further:
Credit policy and debt-collection processes are fundamental requirements to run a profitable business.
Knowing who to approve for credit, how much credit to extend and how to collect are key responsibilities of successful business ownership.
I can almost feel heads nodding in agreement. But the reality is that most small businesses are afraid to know the truth about their customers’ credit because they are terrified to turn away potential business.
Small businesses can fail if they don’t understand the value of credit intelligence and accounts receivable and collections practices for all the reasons Ortiz outlines in his article. Kevin Kiernan, FTRANS VP of Sales, just yelled over to me from his office, “Hey, I just scheduled lunch with that Ortiz guy!” Maybe he’ll come back with some more small business wisdom.
Today I came across an interesting quote from Norm Brodsky’s article in the Street Smarts column of Inc Magazine. Brodsky is a veteran entrepreneur who is a co-author of the Street Smarts column and has founded six different companies. His article discusses the pre-recession atmosphere where banks were willing to absorb risk and it was easy to grow, buy and sell a business. On banks in today’s lending environment he says:
“They’ve since eased up a bit, but banks remain extremely cautious — which is normal. And that’s the point. What’s happening now is not an aberration. The aberration was what was happening then, at least as far as valuations are concerned.”
In the article Brodsky reflects upon how willing people were to ignore risks back in 2007 when he was attempting to sell his records storage company, CitiStorage. It is his belief that the Federal Reserve’s policy of making capital “cheap and plentiful” hugely affected the value of companies just like CitiStorage by nurturing intense competition amongst potential buyers. He describes the pre-recession economy as somewhat of a “feeding frenzy” where people were simply blind to the dangers of participating in risky transactions.
But that got me thinking— is Brodsky’s view correct? How cautious should lenders be? Is the willingness to absorb risk necessary for growth?
Now that I’m back at my desk after the holiday break, I came across this news note from WXIA –TV and the Metro Atlanta Chamber of Commerce President, Sam Williams.
*According to Williams, thinking “small” may pay off big in the long run. “This economy is going to turn around when small business turns it around,” he said.
Even in a city that has the 3rd most Fortune 500 businesses in the U.S., Mr. Williams points to the role of small business growth in growing the economy overall and highlights the current financing obstacles small businesses face.
With bank lending slowing, small businesses must be open to alternative ways of expanding their working capital. FTRANS helps small businesses get the funding they need to begin growing again.
Excerpt from the full article:
As business and political leaders met in Washington to discuss job growth, Metro Atlanta Chamber President Sam Williams offered his own thoughts: “The private sector creates jobs. The government cannot create sustainable jobs over the long period. I think the biggest part of our economy that needs help is small business owners.”
According to the Small Business Administration, small businesses account for 99.7 percent of employers. They employ more than half of private sector employees and they account for 44 percent of the total U.S. private payroll.
In a conversation with reporters Thursday, Williams said the scarcity of credit is holding small businesses back. “Availability of loans and financing from the financial industry. They’re being pushed down a lot by the regulatory environment that’s coming out now and the whole aftermath of the financial crisis,” he said…