No one could have imagined that one day 80% of the US economy would grind to a halt, unemployment would soar past 20% and GDP would sink by 30%. That is exactly what is happening in the first and second quarters of 2020. Let’s not forget the hundreds of thousands of citizens hospitalized and dying. The next shoe to drop is US businesses themselves.
Retail, travel and hospitality have been the hardest hit. With no revenue coming in, businesses have been forced to shut their doors while expense such as rent and utilities keep going out. It’s a death spiral for even the best managed and largest.
Another industry getting decimated is oil. It was only months ago the president crowed about America being the largest producers and exporters of oil. That’s a big turnaround for a county that in the 1970’s was brought to its knees by an Arab oil embargo.
It’s deja vu all over again. Here is the short version of a complicated story. America became an oil giant by using an extraction method called fracking, a very expensive process for getting oil from the ground. The common pumping of oil costs producers around $20 a barrel. Fracking on the other hand, costs producers closer to $40 a barrel. For the American oil industry to stay profitable and remain the largest producer, oil has to sell for north of $60 a barrel. Any lower and it’s just not profitable to take it out of the ground. If oil is not fracked, America can’t produce. Game over USA oil.
For the last couple of decades Russia and the Saudi’s have held back production to keep prices around $60 a barrel. Russia, who is no friend of the US and upset by sanctions, realized by keeping oil high, they were losing market share to the Americans; an observation not lost on the Saudis. To gain back market share, Russia and the Saudis decided to maximize production to flood the market, driving down prices, hoping to bankrupt US oil frackers. Russia gets the added satisfaction of retaliating against the US for applying sanctions. Obviously Russia and the Saudi’s would be hurt by a price war in the short run, but they and OPEC would gain more control of the market in the long run by eliminating America, a non-OPEC producer.
If oil producers, retailers, hospitality and travel companies go bankrupt, businesses that sell and/or sold to this group are not far behind. If you have receivables to any of these industries, collecting may be difficult to near impossible. It might be time to rethink how your goods and services are sold.
If you sell by credit card, half of your problems could be behind you. If you sell or sold on 30, 60 or 90 day terms, your cash flow could be seriously impacted. It’s time to use or accept “ Early Pay” to conduct business. AeroPay Express can take the risk out of selling your product or service on terms and get you paid right after delivery. Unlike a bank that has full recourse when you finance your receivables, AeroPay Express provides credit protection, guaranteeing once paid, always paid. If you are a buyer, why not help vendors in your supply chain. Get them paid quickly by offering to pay through AeroPay Express.
If you don’t know what the future holds, take a minute and give AeroPay Express a call.