The world’s economy has been rocked by one of the most severe economic crises to ever happen in human history, and it has all occurred in a record-setting amount of time. The frenetic pace of this economic calamity has yet to hit much of the wider stock market and equities that are continuing to trade at all-time highs. However, underneath this hidden surface, there has been a wave of manufacturing bankruptcies building up as companies failed to make enough to meet their monthly obligations.
As of right now, the way things are shaping up, it looks like the manufacturing sector of the economy could be one of the hardest hit by this bankruptcy wave. Already several large publicly traded companies have been forced to declare bankruptcy, and the signs seem to indicate that these are just the first view of a coming tsunami. Why exactly are these bankruptcies on the way, though? And is there anything we can glean by parsing through the data?
Difference In Bankruptcy Filing Rates Dependent On Company Size
While pretty much anyone can take a glance at the morning news headlines and tell you that the economy is not exactly in the best shape ever, there are not many who fully understand the exact disarray we are currently experiencing in the world. This chaos seems to be directly affecting larger companies more readily than it is a smaller enterprise, which can be seen in a clear diverging trend between bankruptcy filing rates that are directly dependent on company size. Larger companies who are more reliant on complex global supply chains have been more adversely affected by the current economic crisis.
Increasing Debt Burden On Nonagricultural Corporations
Although the lead up to this current recession did feature several strong economic features that led many to believe the world’s economy was in a much stronger state than it really was one factor that is undeniably affecting companies today is a large amount of debt most publicly traded companies accumulated over the last several years. Companies today have the highest level of debt that companies have ever held in history.
High Unemployment Levels Affecting Consumer Demand
Global lockdowns, in response to the health crisis, have forced many workers to stay home, and as a result, we have been losing more jobs than at any other point in history. With literally tens of millions of people unemployed, the loss of income being experienced by the working class is severely suppressing demand for manufactured goods currently. This is directly affecting the ability of manufacturers to sell the goods that they are capable of making, and they are dropping their prices in response, further limiting the profit potential that they normally have.
Disrupted Supply Chains Affecting Supply-Side Economics
The world’s economy is more interconnected than it ever has been before. For years we have always only seen this in a positive light, but today we are beginning to see some of the unexpected downsides that can be associated with such a close interlinking of international economies. Even in areas that have not been directly impacted by the COVID, 19 pandemics have been experiencing struggles in their economic activity. This is a direct result of international economies locking down and disrupting supply chains globally, leading to a spider web effect of economic catastrophe. It has become nearly impossible for business owners to correctly match supply with demand in most of the world’s economies.
Failed Debt Collection from Manufacturing Customers Is Leading To Industry Stress
As consumers are stuck at home unable to go out and work, they have begun to fall behind on their bills. With little in terms of income support, this has left many companies with a growing list of accounts receivable going unfunded. Thankfully most companies are able to avoid a little bit of loss without suffering any effects that are too catastrophic for the organization to continue operating.
However, as the total number of customers that are failing to meet their payments on time continues to increase, more and more companies are beginning to feel the pressure. As they are unable to collect on the payments that their customers owe them, the companies are then, in turn, unable to make the payments on their debt obligations. As referenced earlier in this article, most publicly traded companies have higher debt levels than they have had at any point in history. Meaning that most companies have higher minimum payments that are due to their debts each month, then they have had at any point. The high minimum debt payments that most companies are obligated to make every month, coupled with the decline in their revenue streams, is beginning to lead to some obvious effects. Several notable companies, including Hertz, have already begun their bankruptcy filing process. Many other manufacturers are now wondering what they can do to avoid this fate themselves.
Third-Party Collection Agencies Represent A Good Solution For Business Owners
To avoid going bankrupt, a manufacturer simply needs to bring in enough revenue to make their monthly minimum payments on their debt obligations. One sector of the economy has played an unexpected role in helping to stave off this undesirable result for many companies, and it is the debt recovery industry. If a company switches its focus from producing whatever product or service they produce to collecting on previously sold accounts, they will cease to generate new revenue sources and only stave off the inevitable.
Hiring a third-party company to handle your debt collection efforts will allow you to maintain focus on what it is that your company does. This will position you to enter back into the economy once things start coming back together in a much better position. The third-party company will have the expertise that is necessary to get the results you need to meet your minimum monthly debt obligations. By generating this revenue for you, you will be able to weather this economic storm more healthily as a corporation.