How Have Building Material Suppliers Coped With The Effects Of The Coronavirus Economic Crisis?
If you are aware of the economic conditions currently being experienced worldwide, you already know how original the state of the world economy is today. Nearly every industry in each sector of the economy in almost every country on the planet has been affected by the current crisis. How is the world economy faring today, and how have building material suppliers done in comparison?
State Of The World Economy Today
The world economy is in shock with numerous economic indicators hitting unprecedented levels often in contrary directions indicating the absolute chaos present in the marketplace currently.
Declining Equity Values
Since the beginning of 2020, when stocks hit their all-time highs, they then had the most severe stock market crash since the 1930s, with the S&P 500 declining over 40% in value at one point.
Markets have since rebounded past previous all-time highs to create new records showing the level of volatility within the markets being at the most extreme level ever recorded.
Skyrocketing Unemployment Rate
The most significant number of people to ever lose their jobs in the shortest timeframe in history is still underway.
In the United States, before the coronavirus lockdowns, the most substantial number of people to file for unemployment in a single week was in 1987 when a total of 675,000 people filed for unemployment. In the current crisis, a new record was set with over 6 million new unemployment filings happening in early March and every week. Over 1 million new filings have been made for well over ten consecutive weeks at this point. Remember, before the current crisis, the previous record was less than 700,000, meaning each week for the last four months, nearly we have had double the past history worth of new unemployment filings.
Stagnant Hiring Rates
Hopes of a quick V-shaped recovery from the coronavirus economic crisis or dashed upon slow hiring rates after the United States economy reopened. In addition to continuing high levels of new unemployment claims even after state economies re-established, new hiring rates have been able to do little to dent the elevated unemployment rate.
Successful Debt Payment Collection
The Top 5 Key Methods Used By Reputable Building Material Suppliers
In the construction industry, companies have been particularly hard-hit by the current economic crisis, much like they are in nearly every economic downturn we have experienced in this country over its history. Building material suppliers can be particularly hard-hit because of where they sit in the supply chain. The majority of their clients are dependent on new construction for their income, and when this slows down, they can have a difficult time making payments to the building material suppliers.
In effect, this creates a squeeze on the operating costs for the building material suppliers. The building suppliers lose money on products that were supposed to have already been sold. Building material suppliers must be exceedingly cautious over the next few months as the economy regains its foothold.
To effectively navigate these treacherous waters, you should build the following five habits to protect your business from the worst of the economic effects this crisis has given us so far.
- Qualify Clients Thoroughly Before Closing Deals
Credit ratings from a year ago are no longer relevant because of the widespread and rapid changes in the job market and the overall economy. You still need to qualify your customers before you close a deal. Consider if there are any alternative means of determining the creditworthiness of your clients.
Are you able to verify their income in any way and determine how stable their income sources are in the face of the current crisis? Finding the answers to these questions will let you know if this is a client worth taking a risk on or not.
- Verify Purchase Orders Are Completed Entirely And Signed For Each Account
Do not let a client walk out before you have completed all of the paperwork. Research indicates the likelihood of completely closing a deal after the first round of negotiations if they are unsuccessful decreases by as much as 30%.
- Limit Your Exposure To Credit Especially With Higher Risk Items
Applying for credit is an easy way to fill in the gaps of what is seen as a temporary budget shortfall for many companies in the construction industry during downturns. If the recession lasts longer than expected, it leaves them in even more difficult circumstances than before. Limit your total amount of credit Utilization and notably refused to extend credit for high-risk clients or investments.
- Obligate Developers To Give Payment Guarantees
Before you allow any developer to begin work on a project, you need to have a payment guarantee that can be enforced legally on file.
These are for your protection and for the protection of the developer too. They give you peace of mind knowing that payment will be collected, and there are enforceable consequences for failure to comply.
- Contact Third-Party Collection Agencies Immediately Upon Delinquencies
Building material suppliers do not need to let any accounts go delinquent and take it lightly. During downturns, each client must receive their full compensation entitled by their contractual obligations for the survivability of their company.
In the event, a client fails to pay the building material suppliers who ultimately emerge victorious from economic crises such as the coronavirus crisis are the companies who have established relationships with third-party collection agencies like ours that specialize in building material debt collections and contact them as soon as possible.
Third-party collection agencies can enhance the efficiency of your collection attempts and help you end up with fewer unfunded accounts by the end of the year.