In recent years we have been very lucky with the economic situation in Germany. Fortunately, there are fewer corporate insolvencies in such phases than in times of recession. But as things stand today, in April 2019, the end of the good times is approaching and we must prepare ourselves for a cooling of the economy. There are many reasons for this.
Reasons for the downturn
On the one hand, it is noticeable that the demographic change is now striking more and more. The baby boomers are retiring and fewer people are following in the labour market. So when 100 employees retire, only 60 young people will be available to fill their positions. Unless you look around abroad. Unfortunately, however, many EU countries have the same problem, so that we are actually only heating it up further. It is said that in Eastern Europe it is difficult for people to find a craftsman to repair something in their house. All young people who are able to work emigrated to the richer countries in the West. In other words, the shortage of skilled workers would actually be much worse in Germany.
Another reason is that the good Mr. Donald Trump acts like an elephant in a porcelain shop and has just spurred on a trade war with the People's Republic of China. So in a phase where things are not going well in some countries, he breaks a conflict from the bridle that further weakens global trade. History will show whether the idea was so good. Hopefully it was just a threatening backdrop with which he occasionally works.
So let us hope for the best. But one thing is certain. When a recession comes, it gets really bad. The ECB has already cut interest rates to zero. This has led to people consuming like crazy. But what if that doesn't help any more? Further interest rate cuts are no longer possible and EU citizens cannot consume more without getting into debt. That is why monetary policy is pretty much hands tied.
The number of corporate insolvencies
As a result, the number of corporate insolvencies will, of course, continue to rise. As a company, you should be prepared for the fact that more and more customers will go bankrupt and not settle their bills.
You can then protect yourself by:
- calls in a debt collection service for the Cash Management
- prepayment insists with his customers
- obtain financial information
So with a few precautions, you're definitely gonna have to deal with it. In any case, it will be better in the future not to do business with some interested parties. Then payment defaults are one thing. You have to bear the costs yourself and they have to be paid. That can also mean the end for yourself.