to settle for pennies on the dollar
because they no longer have access
to employees and other evidence
necessary to prevail in their lawsuits.
2 Sell As-Is and for Cash on (or before) Delivery, if Possible. The
easiest way to eliminate setoff risk is
simply to modify customer
agreements to indicate that all items
sold during a liquidation process are
final, without a right to future setoffs.
While one can reasonably expect that
such a sale would come with its own
valuation discount, such a markdown
typically pales in comparison to the
cost of lengthy litigation in the future.
Furthermore, receiving cash upfront
eliminates future collection risk, which
is currently at an all-time high across
the service center industry.
3 Analyze Accounts Receivable Insurance Options. Service
centers, more so than other
businesses, tend to be enrolled in
accounts receivable insurance
programs. While such policies can be
confusing to navigate and rarely cover
100 percent of losses, they can
significantly protect against collection
risk if they are used properly.
In many instances, claims must be
reported before receivables become
excessively delinquent (typical cutoffs
for claim reporting range between 90
and 180 days past due). In addition,
most policies require that a detailed
set of claims reporting procedures
be followed. It is imperative that a
turnaround professional inquire
about such policies at the onset of an
engagement to ensure that submission
deadlines are met and proper
reporting procedures are followed.
4 Pay Careful Attention to Credit Risk. As stated previously, most
service centers currently face
May 18-20, 2016 | Omni Barton Creek Resort & Spa | Austin, Texas
Hosted by the TMA Central Texas, Dallas/Ft. Worth, and Houston Chapters
It is advisable to bring in an inventory specialist at the onset
of the engagement to revalue a service center’s inventory so
that policies and procedures can be put in place to ensure
that selling prices approximate current market values.
Learn more at turnaround.org