3 things every credit management team should consider post Covid-19
While the UK is by no means out of the woods as far as the impact of the Covid-19 pandemic is concerned, now is a great time to think about what changes you may want to make to your future credit management strategy.
Late payments, which had already been a growing issue in recent years, have caused a large amount of disruption to small and medium business in the UK in the months since the pandemic started.
Recent data from research company Critical Research showed that 50% of the UK’s SMEs are being paid late, and they have lost over £20,000 on average in bad debt alone since the beginning of the pandemic.
While some late payments are inevitable, taking a proactive approach to credit control will have a positive impact and could prevent some late payments down the line.
Here are 3 areas you may want to consider rethinking for the post Covid world.
Managing distributed teams
If some or all of your employees have been working remotely this may seem obvious and, while it is important to work on managing and improving communication within your distributed teams for all areas of your business, we’re actually referring to the teams of your clients.
It’s worth remembering that many of your clients will still be adapting to a new way of working. Communication may take slightly longer and be less clear when things have to go through multiple parties, and this could cause delays.
It might be a good idea to reach out to your customers and ask about any changes and how you can make things easier for them with regards to paying your invoices. It could be as simple as ‘cc’ing someone new into your email communications or sending invoices at a particular time of day, when someone will be online to confirm receipt.
It’s also worth revisiting your invoices and terms and conditions to make sure you’re communicating important points as clearly as possible.
Finding the right level of tolerance
Before the pandemic, it’s likely you had a clear idea around what you were willing to accept from your customers in terms of payment delays.
Maybe you had a customer that always paid a few weeks late, and because you knew that you factored it into your cash flow plans and it did not bother you too much. Maybe you used a fairly aggressive strategy when it came to late payments.
Either way, things are likely to have changed. In the early months of the pandemic, many businesses were forgiving and understanding, often offering payment holidays, but that is not sustainable long term.
It’s a good idea to consider not only how tolerant you want to be, but how tolerant you can afford to be going forward, and work on developing a strategy for how best to handle late paying customers without damaging your valuable relationships.
Although many businesses now take some or all payments electronically, there are still some industries in which cash payments are the norm.
After the pandemic, many businesses are now considering how they can go cashless, with even some retail and catering businesses insisting on card payments only.
If you are planning on going totally cashless, you’ll need to consider how this will affect your customers, and it may be wise to approach them about what other payment methods you have available and how suitable they will be.
You should also reach out to your own suppliers if you have traditionally paid in cash to discuss how you will handle payments going forward.
If late payments have become a problem for your business, it could be time to consider external support such as a debt collection agency, that can help your business recover unpaid invoices before they create a significant cash flow issue.
If you want to talk to one of our consultants about the support Hilton-Baird Collection Services can offer, call us on 0800 9774848 or request a call back.