Or that the customer has suddenly been hit by a big lawsuit, inadequate insurance, stale inventory or bad receivables?
As the business has grown, I have learned that there are many other things to fear: cash flow problems, bad receivables, embezzlement, employee lawsuits, government offices, recessions, accidents and product liability, to name a few.
For example, reducing reserves for bad receivables to meet analyst estimates and filling the distribution channel at the end of the year to boost sales are, sadly, time-honored tactics.
Fires, floods, suppliers not performing, employee screw-ups, your own screw-ups, machine failures, leaking roofs, car accidents, recessions, great recessions, bad checks, bad receivables, bad people, market shifts, workers compensation claims, more of your own screw-ups, health insurance increases, new competition, theft, more screw-ups.
(Compounding its woes, Monsanto, which sold $150 million of its Roundup Ready soybeans last year in Argentina, had to write down $154 million for bad receivables there).
Visa Commerce could become a new form of C.O.D. (competing with United Parcel Service) and let companies better manage their cash flow and reduce bad receivables.
We put our candidates through hell, combing their financial documents for the slightest scent of trouble: bad debts, lawsuits, slow receivables, funny accounting all grounds for dismissal.
Let me summarize the bear case: The big banks are burdened with bad paper in credit card receivables, commercial and home mortgages, and even commercial and industrial loans for years to come.
Pavlo employed an array of tricks taught to him, he says, at MCI to hide hundreds of millions of dollars in aging bad debts and clearly uncollectable receivables owed by a raft of upstart telecom resellers.
If securities could be made out of mortgages, why not car loans, credit-card receivables, business loans or bad debts?
Business is also about understanding the reality that bad things happen: recessions, lawsuits, uncollected receivables, new competitors, and assorted calamities like fire, flood and other biblical afflictions.
