In case you had wondered, my laptop… that attachment that travels with me everywhere I go in an oversized red bag… died. Apparently, an undetected virus found its way into my system. Starting slowly, it scoured my computer, searching for files until it found and destroyed each application. When I say applications, I mean Word, Excel, email, and even my internet. I believe the terms the technician used were ‘divide and conquer.’ If it had been detected earlier, then the need to send my computer off for a few weeks would never have occurred. Thankfully, I backup everything on a separate server… we’ll save that topic for another day though.
This got me thinking however. Isn’t it interesting how our business processes in factoring can be gradually eroded (or attacked) as well? Many times, these system breakdowns do in fact go undetected. And, left without oversight (with some type of check and balance to ensure these processes remain intact) the theory of divide and conquer may actually arise.
Think of the computer applications individually but now in a factoring sense, as underwriting, legal, debtor (customer) credit, verifications, invoice documentation, notifications, account management, and collections. What happens if any of these areas are not performing, something gets missed or a key person with any of these responsibilities doesn’t understand their role in the overall business (why they do what they do)? What if an ongoing flaw in the process goes undetected over time? What if that flaw is lack of communication throughout the organization? Then, what would happen within your business? Would your overall system shut down?
Most factoring companies would say, “No.” However, I challenge you to consider that carefully before answering, especially considering the current market conditions. Let’s just throw out a few scenarios. A large deal comes in through underwriting. The transaction is approved but certain risks were mitigated based on the account being managed under detailed guidelines, which may include certain funding documentation being included with invoices, or specific questions being asked during verification calls.
Now, let’s assume that personnel changes and new employees do not know the protocols for the account management, or that those calling on invoices believe everything has been going okay for a while so they no longer need to ask all the questions they used to ask. Did anyone know? How was it communicated? And, if not, why? Or, what if the concentration account is in an industry in which the factoring company has little to no experience?
What would happen if a problem occurred? Can it be corrected? What will the effect be on your factoring business? If it is a concentration within your portfolio and if the breakdown in the process has gone on too long, is it even correctable? It may in fact cause your system (company) to shut down. Remember, the sooner an issue can be identified, the sooner it can be corrected.
With all of that said, the sole purpose of this weblog is to bring out an element that you may not be considering. Think about all the pieces of your business, the different areas and processes, how they can be affected both internally and externally, and how you can ensure that your business will not be divided and conquered.
Wishing you continued success. The Factor Guru.