How Supply Chain Issues Can Impact Corporate Lending

March 27, 2024

With unprecedented world events causing supply chain disruptions, commercial entities are implementing new tactics and strategies to navigate what might be an upcoming stretch of difficult years. The Coronavirus pandemic shed light on the intricacies of international supply chains, while the conflict in Ukraine indicates supply chain slowdowns aren’t going anywhere soon. It’s difficult to predict how current international affairs will play out, but businesses should be over-prepared instead of underprepared.

Change and pivoting are a part of surviving as a business, more today than ever. The challenge, however, is determining how companies should navigate uncharted waters. While it is impossible to plan for every contingency, there are strategies businesses can implement immediately to get ahead and stay ahead of any disruptive circumstances.

Make It Easy for Clients to Pay You

Technology makes it easier than ever for clients to pay invoices. Companies should use technology to their advantage and make it easy to keep a cash flow current. That means offering different payment method options for clientele. Some may prefer to write a check, while others prefer digital methods or online credit card payments. Sending digital invoices that provide different payment options helps clients pay you using their preferred method.

Another key to keeping cash flowing in difficult times is to help clients prioritize paying their accounts receivable. If they’re experiencing cash flow difficulties, they have to make difficult decisions on who to pay first. Incentives such as bonuses for on-time or early payments or a percentage off their invoice for early or on-time payments help make a company stay top of mind when paying bills.

Enlist Professionals to Create Accurate Financial Projections

Working with a financial professional to generate projections for a company’s financial future is integral to understanding potential issues that may arise and how to prepare for them. Not only can a financial professional assist in ensuring the accuracy of projections, but they can also assist with making sure your projects account for inflation. With accurate projections, companies can foresee possible bumps in the road and be prepared.

Add Additional Suppliers to Your Network

With a volatile market, relying on one supplier can be catastrophic if something happens to them. Creating a network of multiple suppliers decreases the chances of being impacted by a supply chain crisis. Additionally, building mutually beneficial relationships with multiple businesses provides the bonus of creating an ecosystem of companies willing to support each other through tumultuous times.

See If You Can Increase Your Lending Capacity

Do you have assets that increased when the economy was growing? If so, connect with your banker to explore the options for increasing company credit and if there are corporate lending trends that fit your needs. Establishing resources for reserves now can alleviate the pressure companies might face if their financial projections paint a less-than-ideal picture.

If additional loans aren’t an option, meeting with a lender to determine the criteria that need to be met provides information that can help a business take the necessary steps to have this option.

Order Extra Materials and Supplies

Another way to get ahead of the curve of corporate supply chain issues is to start ordering ahead of one’s regular schedule and to order extra supplies. Of course, this should be done strategically to avoid an excess of materials that are unusable or go to waste. Storage capabilities and supply shelf life should be considered when ordering extra supplies. When deciding which extra supplies to order, research which is most affected by any supply chain issues. This will reveal which supplies to stock up on while providing an excellent opportunity to reach out to any new network suppliers and establish business with them.

Indeed, no one can accurately predict what’s going to happen in the future. However, the past few years have shown us that almost anything can happen, and the effect on business can be devastating for anyone unable to adapt quickly. By taking the steps outlined in this article, companies will have a good grasp on their financial future, have streamlined payment channels, and have more financial opportunities.

Relationships with additional suppliers are not the only relationships to strengthen. Companies should also build a relationship with their banks and lenders. Having a trusted commercial lending partner increases financial flexibility and is beneficial to finding the best solutions for your organization.

Be sure to contact your First Western Trust Banker, advisors, and CPA today to start building a strategy for the coming years.