When assessing risk in dealing with a business, it’s important to know as much as possible about both the customer and the industry the business  operates in. For example, in today’s economic climate, any business that’s even remotely connected to the real estate sector should be viewed with caution. That includes a wide range of companies from carpet manufacturers to home builders. Likewise, any company that sells to the auto industry is likely being squeezed because of the downturn in that sector. Therefore, unless there are convincing reasons to sell extensively to companies in such industries or extend credit facilities, it might be advisable to limit exposure to them or make certain your terms of sale reflect both the client and industry.
When dealing with companies in depressed industries you should have as much information as possible about the firm’s finances and review, on a regular basis, cash flow and all important ratios. During this analysis, review their payment history in comparison to industry standards and note any changes to their payment habits. Understanding the importance of keeping a watchful eye on your debtors and the industries they are in could save you time and most important of all, money.