COVID-19 has wreaked havoc on businesses, with late payments likely to influence business viability.
Late payments are back to 11 days, reflecting the difficult and uncertain trading conditions. In late 2019, the average days were at a 10-year low of less than 10 days late in business to business payments.
As businesses experience cash flow strains, or worse, face shutdowns or bankruptcy, the flow-on effect could impact your bottom line.
Here are three proven tips to optimise your processes to help ensure you get paid.
(1) Don’t be afraid to say no
Businesses often make the mistake of rushing into new contracts and bringing on new customers, without consideration of the consequences.
By taking on new work with a poor payer, you and your team may be worse-off than if you had said no to the contract in the first place.
A credit check as part of the onboarding process is a good way to assess the risk of a new customer. And if they do have a poor credit score, you may be better off turning down the business altogether or negotiating credit terms that protect you, for example a deposit, payment in advance, payment on delivery or a low initial credit limit.
You should also monitor for warning signs and changes to existing clients – changes to credit scores and payment behaviour are important signals.
Good communication goes a long way and is critical to supporting customers and being able to collect payments through these challenging times.
The key to good collecting is clear and consistent communication.
Communicate through a variety of channels and take a personalised approach.
Start by delivering reminders through emails and SMS messages, reserving your skilled staff and conversations for higher risk and overdue accounts.
Don’t wait to contact your customers when invoices fall overdue.
With the current turbulent environment, it is even more important to get on top of overdue payments quickly – the longer you wait, the more chance there is a customer’s circumstances may have changed, changing their ability to pay.
Be proactive and start contacting customers before their invoice is due, and if an invoice does fall overdue don’t delay contacting the customer.
(3) Ask for help
Increasing late payments can put significant strain on your accounts and credit department.
When you get to a stage where you have tried multiple channels and strategies to resolve an outstanding invoice or invoices, it makes sense to outsource these, freeing up your team to work on getting invoices that are earlier in the collections process paid.
If needed, seek help from a third-party collections agency.
As the leading independent provider of trusted data and analytics products and services in Australia, illion is your perfect partner in these uncertain times. We leverage consumer and commercial credit registries, which comprise data on over 24 million individuals and over 2 million commercial entities, to provide end-to-end customer management solutions to clients in the financial services, telecommunications, utilities and government sectors.