Credit Management July and August 2020

COMMERCIAL COLLECTIONS
AUTHOR – Sean Feast FCICM
to the needs of their customers, they must
try to ensure they prioritise their collection
process and procedures. We have several
clients who have furloughed almost all staff;
however, the finance department are still
operating as money still must come into
the business. Although there are several
grants and loans available to help in the
current environment, for some businesses
this may not be sufficient and therefore it is
imperative they recover what is owed to them
in a timely fashion.”
Lynne says that while some people are
apprehensive about asking for the money,
recovering outstanding payments is revenue
that can make the difference between a
business remaining operational and closing
its doors: “I believe that the most important
point here is that you treat each business on
a case by case basis,” she explains.
“You must be thorough on implementing
your credit management process much like
a commercial debt recovery company is. It
is essential you understand what impact the
current situation has had on your customer
as credit scores and rating before this
crisis will have no bearing on their current
circumstances nor give you an accurate
reflection on their ability to pay. You need to
know what impact it has had on their sales,
and what impact it will have in the coming
months.”
Lynne also says credit teams and businesses
need to be flexible: “In this climate you
must be open to slightly deviating from
your standard terms or open to receiving a
payment plan if necessary,” she continues.
“You must keep contact with your customers
high until payments have been made and
you must provide clear deadlines to your
customers and follow them through.”
She says you cannot allow for your customer
to control the timeframes: “You must decide
on the timescales that suit your business
within the constraints of your customers'
financial status or creditworthiness. If this
fails, then it may be time to assign this to a
professional pre-litigation commercial debt
recovery company to facilitate the payment.
A lot can happen and change in a business
within a week.”
CHALLENGING ENVIRONMENT
Yvette Gray, UK and Ireland country director
for Atradius, agrees, and says that the good
news is that debt collection is still very much
underway but not without its challenges:
“Many firms have paused operations,
effectively ‘shut down’ with the entire
workforce on furlough, while others have
shifted to working from home; this means
that the traditional processes for collecting
debt may simply no longer be effective. And
while some may be genuinely struggling to
Advancing the credit profession / www.cicm.com / July & August 2020 / PAGE 19
pay their bills at the moment, for others, the
current situation becomes yet another excuse
not to pay and it’s crucial to differentiate
between the two.”
What Yvette means by this is that this isn’t
time for ‘business as usual’: “Businesses need
to evolve their processes to overcome the
additional hurdles created by COVID-19,” she
says.
“A new framework to manage debt
collection is the first step in allowing
businesses to identify potential problems
early on and manage the risk of late and nonpayment.
A comprehensive assessment of
your accounts receivable portfolio is essential,
segmenting customers into key accounts
which need a personal approach and those
which will benefit from automated practices;
such as accounts characterised by high
volume, low value invoices. Some businesses
come to us because they want us to handle
the automation for them, enabling them to
invest in their key customers while others take
the reverse approach so they know their key
customers are handled with care, ensuring
effective payment collection while preserving
good supplier relationships for future trade.”
Unfortunately, Yvette says, with more
challenging economic circumstances, the
number of customers struggling to pay on
time is likely to increase: “In these situations,
take a diplomatic approach and consider
renegotiating payment terms where it aligns
with your credit policy,” she continues.
“Offer short-term relief – such as suspending
interest and late fees – in exchange for prompt
payment and, where possible, offer incentives
to encourage early payments. Where there
are liquidity issues, work out a payment plan,
accepting that some payment in the short
term is preferable to having to write-off the
whole debt should the situation deteriorate.”
Prevention, she advises, is better than cure:
“When it comes to invoicing, streamline
your processes and iron out any scope for
error or dispute. Continually monitor your
accounts receivable portfolio so you can
spot cashflow problems early and review the
format and frequency of your invoices and
reminders; are they being addressed to a
contact who is now working from home or to
an office which is closed? Ask your customer
if invoicing needs to be adjusted or payment
procedures temporarily adjusted. Proactive
communication and where necessary
incorporating modifications could nip
invoicing-related delays in the bud.
“Payment reminders should be timely,
professional and appropriate,” she adds.
“Whilst you may need to adapt to address
current circumstances, it’s also prudent
to bear in mind past payment behaviours
and perhaps consider changing your usual
protocol to stimulate action. For example, has
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