CREDIT MANAGEMENT
Debt Collection During Covid-19 Pandemic : What Are The Options ?
By Wasilwa Miriongi
During my entire life in debt collection I had never come across an accountant or a paying officer fake sickness of pretend to be in hospital so as to avoid paying my customer ’ s invoice . It has occurred to me during this pandemic period . This accountant has given me so many collection excuses to the extent of being hospitalized , yet it is just the cash-flow difficulty his organization is going through this pandemic period .
Research has indicated a strong likelihood that coronavirus plays havoc with the slowing global economy , impacts many key sectors , disrupts global supply chains , and reinforces an upward trend in global business insolvencies .
In Kenya , it is estimated that as many as 75 percent of small and medium enterprises ( SME ’ s ) have been affected directly in one way or another such that one third may have closed down .
The chain reaction then is the repercussions of Covid-19 on any part of the business systems of your customers could cause them to experience : cash flow strains or insufficient liquidity ; always delay payments or default on payments ; have their customers delay or default on payments to them ; and have their businesses shut down .
The deterioration in the payment behavior of your customers can be part of the pandemic ' s collateral damage , and it could have a crippling ripple effect on your business ' s cash flow as well . To minimize such risk , you will need to optimize debtors and limit bad debt losses as much as possible . Below are four accounts receivable collections best practices you can adopt in the time of the pandemic .
Use analytics to assess your accounts receivable portfolio , consider the data you need to identify the vulnerable
It is important to identify the accounts in your portfolio that may encounter liquidity problems due to Covid-19 . By assessing and categorizing your accounts , you can focus and tailor your collections strategies to the accounts that need them most .
The deterioration in the payment behavior of your customers can be part of the pandemic ' s collateral damage , and it could have a crippling ripple effect on your business ' s cash flow as well . To minimize such risk , you will need to optimize debtors and limit bad debt losses as much as possible .
What is of essence is to proactively identify the vulnerable . It is worth repeating that collections departments are now tasked with dealing with thousands of customers who are not in arrears due to the usual reasons and without the usual market data to help identify and segment them . These clients have been furloughed with a rapid , surprising and significant reduction in income and these dramatic changes in circumstance have yet to be detected by credit bureaus .
As an industry , and even as an organization , you have always been proactive about pre-delinquency . But now you may need to dig deep across the organizations to capture data and find the vital information needed to clearly separate the economic victims from the steady state collections customers .
The data is there - be it from call , collections or communications systems and you need access to this information as it will inform how you talk to your customers who need to be segregated carefully .
Consider renegotiating payment terms with your customers
As long as the renegotiated terms align with your company ' s credit policy , renegotiating with customers carrying payment risk often gives you more chance of collections . The key is being diplomatic while being insistent on settlement terms .
Give your customers incentives to encourage early payments , if possible .
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