Word on The Street is the U.S. Federal Reserve wants to hike interest rates at least a couple more times in coming months, which will effect how much businesses want to risk borrowing or extending more credit to customers, among a host of finance issues.
But are rate hikes a sure thing? Or could the Fed look to scale back rates instead?
We don’t have a crystal ball but there’s a very good case to be made for the latter. Chief among them – we may already be in a recession, and historically the Fed lowers rates to spur economic growth.
Case in point: Manufacturing activity in the Northeast is cratering, according to the Federal Reserve Bank of Philadelphia’s survey of manufacturers.
How bad is it? Manufacturing businesses are reporting sharp drops in economic activity month-to-month. The Philly Fed’s general activity index dropped for the fourth consecutive month, down to a staggering -12.3 points in July. The index for new orders plummeted to -24.8.
To put those numbers in perspective, you’ve got to go back to 1979 for a gloomier report on the manufacturing sector. Just seven months ago, the Philly Fed reported rosy numbers and analysts predicted a bounceback year for manufacturing. Now signs are pointing toward a recession.
Before reining in the Sales team, ask these questions
Now more than ever, companies’ Sales and Finance need to be on the same page when it comes to cash flow and offering customers any “deals.”
Some questions both teams need to ask and find out the answers to if they don’t already know:
- Are payments coming in keeping pace with bills going out? If not, why not?
- Is a customer seeking more credit a good risk? What’s the customer’s payment history?
- Just how late are late-paying customers? Any idea how it compares to the industry average?
- Any uptick in customers being sent to credit & collections? Should there be more or fewer in the pipeline?
Caveat: Sales teams will drive always drive more business if they don’t feel like their hands are tied by their employers.
Consider discussing the options Sales think are needed to attract and keep customers, and increase business. Flexibility is key. So is spelling out specific “perks” the company can’t afford to offer customers right now.
