This article aims at providing practical advice to and sharing thoughts with Credit & Order to Cash Finance professionals on how to best manage B2B cash Collections in a challenging & ever-changing trading environment.
by Evelyne Legaux on 15-09-2022
Truth is the Perfect Storm goes on and on …
As the world attempts to fully recover from two years of Covid-19 pandemic crisis, deal with the dramatic consequences of the conflict in Ukraine, climate change, inflationary pressures at an all-time high & a new recession looming, cash Collections professionals continue to face their biggest challenge ever and remain in the CFO’s spotlight.
Contingency planning therefore is as essential as ever in unprecedented circumstances, and a compelling question is: how best can you adapt your approach to cash Collections with a view to optimising vital operating Cash Flow generation?
NEVER lose sight of your rights as a Creditor!
Due to the domino effect created by trading under open Credit terms, when Debtors experience Cash Flow tightness and liquidity dryness, Creditors are also typically adversely impacted across the board.
In such a context as a cash Collections professional, you might be feeling awkward chasing customers and too accommodating by saying “Yes” to an extended payment terms request to ease their immediate Cash Flow distress, when you should rationally say ‘Yes but‘ or even ‘No’ instead.
However, as a Creditor you should never forget that, even during the harshest of times, you continue to be legally entitled to full & timely payment from your Debtors, provided your own contractual obligations have been fulfilled & complied with.
Clearly, the last thing you want as a cash Collections professional, is to put your own company’s Cash Flow under more pressure than necessary, thus potentially creating the need for increased borrowing & a deterioration in your own Credit risk rating…
Further, more often than not arrears & payment delays would have existed prior to the current uncertain times, therefore Debtors should not take advantage of it to worsen their own payment behaviour even further...
B2B cash Collections MUST go on too!
Be Discerning & Pragmatic
Well, what does that practically mean?
Focus on ‘creating a win-win situation’ with your customer, and be prepared to settle.
Show Empathy & Stand Out from the Crowd
We might never say this enough, but …
Knowing Your Customer’ is more important than ever!
The current post-pandemic context exacerbated by strong inflation, threats to energy security & highly volatile geopolitical risks is likely impacting your customers’ operating margins, purchasing capacity under open Credit terms, Working Capital, Cash position and ultimately ability to trade. Therefore, as a cash Collections professional, it is essential that you understand their specific circumstances & challenges. In addition, the return of a war in Europe, tangible climate change related events & the frightening prospect of energy bills rising out of control may affect people’s mental wellbeing.
Whatever the situation, businesses are always run by people…
Therefore, in such uncertain times, it is vitally important that you:
Debtors are far more likely to pay you – the empathetic & understanding vendor - and to pay you first, rather than all other vendors! You will thus stand out from the crowd!
And if your customers survive their current Cash Flow difficulties, they will remember what you did & will want to continue trade with you as opposed to others. The connection you created will outlive the immediate business impact. Therefore, your company’s reputation in the market place will undoubtedly benefit from it!
Last but not least...
Don’t forget to pay your own suppliers on time to enable them to pay their own suppliers in turn…
On a larger scale, when companies adopt healthy payment behaviours, a positive multiplier effect on businesses in the supply chain is triggered, that benefits all!
Retaining cash in-house instead would prove counter-productive in the long run.
So, all in all...
A professional approach to cash Collections combined with negotiating & influencing skills, is paramount when businesses struggle to survive. Your cash Collections team plays a key role in preventing a difficult situation from turning into a catastrophe, while keeping customers happy & enhancing your company’s reputation in the market place!
Do let us know about your B2B cash Collections experience & key challenges in the Comment box below, by email to firstname.lastname@example.org or indeed through our Contact page.