This year has been a difficult one for many businesses with the effects of the coronavirus pandemic. Late payments have added to the financial difficulties and made successful credit management more important than ever.
As we move into 2021, now is a good time to start implementing changes to improve your credit management techniques. There are some simple processes that you can put in place that will enhance your cashflow and reduce the issue of late payments.
Working with new practices
Some of your clients may still be working remotely and adapting to new processes within their business. This could mean that communication takes longer if it needs to go via numerous people.
It’s useful to speak with your contacts and see what changes have been implemented so that you know how you should be contacting the customer. It may be that you need to send invoices to a central address or contact them on a certain day of the week to speak to the right person.
Reconsider your debt strategy
At the beginning of the Covid-19 restrictions, many businesses were more lenient towards customers who were having payment problems. However, this isn’t a sustainable approach for the long-term future.
It’s essential that you consider your own cash flow when agreeing to any repayment terms. Having a strategy in place for how you manage late paying customers going forward will help to improve your cash flow and maintain your client relationships.
Prioritise bad payers
Where you have a number of late payers, it’s important to prioritise those with the highest value. These should be dealt with via phone calls and, if there is still no response, using a third-party debt recovery company might be necessary.
Smaller debts, from clients who typically pay regularly, should still be chased. However, emails will suffice in the beginning. If these become further overdue, make sure you chase up straight away, to avoid customers thinking that you’ll accept late payments.
Think about your payment options
Depending on the type of business you operate, it might be sensible to look at the payment methods you provide for your customers. If you would typically have taken cash payments, using an electronic system could be beneficial. With the concerns over cash and the coronavirus pandemic, using an electronic method could help customers to pay quickly and safely.
Conduct credit checks
It’s important to regularly carry out credit checks on all your customers, regardless of how long you’ve worked for them. This will provide you with information on their current financial status and enable you to make decisions and alter credit terms. Even regular customers can see their financial standing take a downward turn and they could go out of business owing you a large sum.
If the check shows up any problems, you may need to tighten up their payment terms or ask for deposits in advance. This reduces the risk of late payments and the impact on your cash flow.
Switch to an electronic system
If you don’t already have an electronic invoicing system then now would be a good time to look at moving over. Generating invoices electronically and sending them via email will vastly reduce payment times. It also limits the risk of invoices getting lost in the post or being sent to the wrong department, which slows down processing times.
Keep in contact
Even while companies are working remotely, it’s essential to keep in touch with your customers. Ensure that you have the appropriate contact details for the credit control team and chase up any late payments swiftly. Where payment has been promised by a specific date, check it arrives or make further follow ups.
Forward bad debts to a debt collection agency
The longer that debts go unpaid the harder it becomes to collect on them. Therefore, it’s important to pass overdue invoices onto a third-party debt recovery company as soon as possible. This enables you to keep up to date with those invoices that are becoming due, rather than focusing on chasing up older debts.
Utilising an experienced third-party company often generates a faster result than chasing them internally. They have the experience of dealing with difficult customers and typically customers are quicker to pay when they see that you have escalated the situation.
How can CEA Limited improve your debt collection?
The team at CEA Limited is experienced in collecting all types of business debts. We support your credit control function and quickly recover debts that you’re having difficulties with. Whether your debt is a few weeks, or even months, overdue, contact our debt collection team today to discuss your requirements.
Speak to the team on 0845 643 0635 or email office@cealimited.co.uk.