by Evelyne Legaux on 27-04-2020
As always, during a global economic downturn Cash becomes King for businesses and cash Collections organizations find themselves under the spotlights. More so than ever during this Covid-19 pandemic, a professional approach to B2B cash Collections is critical, no matter how big your business might be.
A lot of topical content is circulating at the moment, and I have been reflecting on how best to provide practical advice to and share thoughts with businesses.
It is clear that the Covid-19 pandemic crisis will have a dramatic lasting effect on economies across the Globe, with some geographies (e.g. oil producing countries as a result of the subsequent fall in prices) and some sectors (aviation, tourism, retail, …) being hit harder than others.
The most severely impacted countries will face the deepest economic recession since WWII in 2020 or even since the 1929 Great Depression, and might default on their sovereign debt payment obligations despite easing liquidity measures taken by Central Banks around the world.
At micro-economic level, more and more businesses across all geographies and sectors, inclusive of large corporations, are facing Cash Flow difficulties and struggling to find the cash needed to settle their trade & other Payables. Payment arrears are soaring!
Additionally, lockdown measures in place across a majority of countries around the world are having a significant adverse impact on existing payment arrears and delaying any pending Court proceedings. Further, whenever Courts resume, extra challenges will arise in countries with complex and/or lengthy legal debt collection enforcement proceedings, even where the local legislation appears favourable to Creditors.
So, Cash is King and now is a time when cash Collections professionals are facing their biggest challenge ever. Contingency planning is therefore essential, and adapting your AR & Collections Management approach to deal with this unprecedented situation is paramount.
Do not lose Sight of your Rights as a Creditor
Due to the domino effect created by trading under open Credit terms, Cash Flow tightness and Liquidity drying up are impacting both Debtors and Creditors across the board.
In such a context and as a debt Collections professional, you might feel awkward chasing your customers and legitimately tempted to being flexible and saying “Yes” to extended payment terms to ease their immediate Cash Flow distress. However, you should never forget that, even during the present pandemic, Creditors continue to be legally entitled to timely payment from their Debtors assuming their contractual obligations have been fulfilled & complied with.
The last thing you want as a debt Collections professional, is to put your own company’s Cash Flow under more pressure than necessary thus creating a need for additional borrowing & deterioration of its risk rating.
Further, in many cases arrears and payment delays existed prior to the Covid-19 outbreak therefore Debtors should not take advantage of current lockdown measures to worsen their own payment behaviour.
B2B debt Collections MUST go on!
Show Empathy & Stand Out from the Crowd
Knowing your customers is more important than ever.
The current pandemic and governmental lockdown measures have likely impacted their business & Cash Flow situation and, as a debt Collections professional, it is essential that you understand your customers own specific circumstances & challenges. In addition, social distancing and working from home may affect people’s mental wellbeing.
Businesses are run by people. Therefore, during this crisis, it is vitally important that you talk to your customers as opposed to writing to them, and ask them how they are keeping and how their business is doing? Adapt your communication tone, show that you care about them and that you understand their needs & feelings. Your purpose is to collect what they owe your company, and by showing empathy, you create an opportunity to build a long-lasting emotional connection and inspire loyalty.
Try to get a holistic view of where your customer’s business is today / will be on the other side of this pandemic. Understand what revenue, supply and Cash Flow challenges they may be facing. Demonstrate pragmatism & flexibility in your dealings with their financial concerns. This is a major trust driver.
Become a primary vendor in your customers mind!
Debtors are far more likely to pay you, as an empathetic & understanding vendor, and to pay you first, rather than other vendors! You will stand out from the crowd!
And if your customers survive the Covid-19 crisis, they will remember what you did & will want to continue trade with you as opposed to others. The connection you created will outlive the business impact. Therefore, your company’s reputation in the market place will benefit from it!
Focus on B2B amicable Collections ONLY
As we said earlier, in a majority of countries around the world, Courts are closed and legal debt Collections proceedings halted during the pandemic.
As a debt Collections professional, you should therefore focus on amicable Collections.
Review your AR ledger thoroughly with a critical mind set to identify Collections risks - customers located in high risk geographies or financially vulnerable customers – and prioritize those accounts for your Collections calls.
Where relevant financial support schemes introduced by local authorities in your customer’s country exist, do encourage them to avail of same to ease off the strain on their Cash Flow.
Be prepared to ‘think out of the box’ and negotiate a tailor-made solution with your customer. Propose options to them. This may encompass extending payment terms for a period of time, agreeing a mid to long term payment schedule, even waiving part of the debt or a combination of same.
Focus on ‘creating a win-win situation’ with your customer and be prepared to settle.
Before granting any payment delays or extension of credit terms, analyse your customer’s financial forecasts to be comfortable that they will have the repayment capacity over the period of time at stake, and make sure that such delay is acceptable to your own company as well from a Cash Flow standpoint.
To tackle the most difficult cases, play a pivotal role by pulling together a cross-functional task force within your company to come up with the best course of action.
If your trade Receivables are insured, make sure that you are compliant with the T&C’s of your Credit Insurance policy. Do not give your underwriter any excuse to deny cover at this unprecedented time!
If you owe monies to your customers, do pay their bills on time to help them pay you in turn.
More so than ever before, professional debt Collections is critical when businesses struggle to survive. By demonstrating empathy & pragmatism, you play a key role in preventing this crisis from turning into a catastrophe while keeping your customers happy & enhancing your company’s reputation in the market place!