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Editor's note: Run-off is a difficult problem for distributors. Once it occurs, distributors can only "mend the fold after the sheep are lost" and learn from the lesson. But now run-off methods are increasingly covert, making it hard to guard against. There is no magic cure for run-off, but standardized management and timely information can minimize the possibility. When retail customers are in poor operating condition, dangerous signals often appear. During daily terminal visits, distributors should make checking retail customers' operating conditions an important task. Since signs precede payment risks, close observation and prompt action can effectively reduce operational risks.
Sales Signals (1) Product flow issues. Retail store sales haven't improved much, but recent stock disappears quickly, indicating product flow problems. Distributors should check if the retailer is reselling to peers or dumping at low prices. (2) Sales deterioration. Sudden sales decline, such as heavy discounting (below supplier cost). (3) No foot traffic. Standing in the store for a long time without seeing customers; the store is deserted. (4) Empty shelves, sparse product placement, and dusty products.
Operational Signals (1) Serious internal conflicts in decision-making, unclear future direction. (2) Unclear or abnormal profit investments (speculation) such as stocks, futures, real estate. (3) Overly rapid expansion without corresponding management and operational improvement.
Payment Signals (1) Inability to pay normal operating expenses like rent, utilities, wages. (2) Delayed payments. Small payments are prompt, large payments are delayed; payment dates change frequently; responsible persons are often absent on payment days. These indicate poor financial health. (3) Switching from cash to notes. (4) Frequent visits from other suppliers demanding payment. (5) Using gift certificates to offset supplier payments. (6) Many bounced checks and promissory notes. (7) Frequent bank changes.
Ordering Signals (1) Abnormal ordering. Retailers who usually order little suddenly order excessively, in three ways: ordering several times their usual sales volume; ordering at inconvenient times (e.g., just before settlement); ordering large quantities of all products, even slow movers. (2) Sudden reduction or cessation of orders. (3) Transferring all purchases from other suppliers to your company. Distributors must be alert; unless the motive is verified as normal, delay supply and investigate further for potential bankruptcy.
Distributors should deeply understand retail customers' sales capability, inventory, and market conditions to know their monthly ordering patterns. Investigate abnormal orders thoroughly.
Personnel Signals (1) Frequent personnel changes. Increases in resignations among management, sales, and finance staff, especially sudden accountant departures. Accountants often sense financial problems first. When changes are frequent, especially accountants, inquire about reasons and assess financial health. (2) Widespread employee dissatisfaction. (3) Listless employees with poor work attitudes.
Behavioral Signals (1) Unkempt appearance and low spirits. If employees who were usually neat and energetic become disheveled and listless, financial problems may exist. (2) Sudden attitude change, fawning over salespeople. If a previously arrogant boss becomes overly friendly, investigate hidden operational crises. (3) Frequent avoidance. If the owner and finance head are often unavailable, increase visits to determine if it's related to poor management. (4) Moving offices from high-end to low-end locations.
Rumor Signals Be cautious when negative rumors circulate about a retailer. (1) Bad reputation. Retailers criticized by peers will eventually have problems. When salespeople hear instability rumors, verify and stop supply before competitors, and collect payments quickly. (2) Abnormal personal life. Retailers need financial and management capability, but also dedication. If the owner indulges in vices and is not focused, the business may fail or incur debt, leading to risky behavior. Pay special attention to such clients.
When these dangerous signals appear, distributors should take decisive and swift action to reduce accounts receivable risk.
Distributors invest heavily in hotels, which carries higher risk, so preventing hotel run-off is also important. The editor chatted with Lao Wang, a distributor of Jin Liufu liquor in Northeast China. He lamented that hotel run-off is increasingly covert. Previously, they collected local newspapers to note hotel transfer announcements and sent salespeople to collect payments, reducing run-offs. Now, hotels transfer privately without announcements, making prevention difficult.
To address this, distributors can prevent from "internal" and "external" angles. When developing hotels, salespeople should investigate the owner's background (including home address), operating condition, and capital flow. After stocking, maintain tracking and learn about the hotel from surrounding shops. Additionally, set up "informants" within the hotel, as staff know actual operations; giving waitstaff small incentives may save significant losses later.