Five Credit and Collections Actions You Can Take in a Tough Economy

Posted by Marilyn Miller on March 24, 2020  /   Posted in Uncategorized

Is your business closed or pared down due to the COVID-19 crisis? If so, I am so sorry, and I hope you are back to full functioning soon. Even if you have no business today, you can plan for tomorrow’s business.  So, here are five things you can do now to help your credit and collections activities in the future. 

 
One: Contact customers who owe you money. 

There is nothing wrong with continuing to ask people to pay what they owe you, even in a recession. People will still pay you. They may pay less or they may pay you a bit later. Listen carefully and be understanding, but communicating with your customers is more important now than ever. 

The squeaky wheel gets the grease. If they owe you money, they probably owe others too. Your conversations do not have to be difficult. It will be reassuring to them that you are still in business and are working to make sure you will stay in business. You may have little chance of getting paid right now, but if you have no chance if you do not ask. 

Two: Review your accounts receivable. Create or review your accounts receivable management program. 

If you do not have a program for regular review and management of your accounts receivable, now is the perfect time to put a plan in place. Your first step is to create an aging report to give you a quick view of who owes you money, and how long they have owed it to you. You can use Quickbooks or even Excel to create an aging report. 

Set up a program to review your receivables regularly and a plan to follow up at each stage of aging. If you already have a plan in place, how can you improve it?

Three: Be willing to revise current payment plans.

If a customer has been making payments to you and tells you they cannot meet their obligation, give them a little breathing room. Offer to temporarily suspend payments or offer smaller payments for a given period of time. Remember that even if someone has owed you money for years, they have to pay you with today’s dollars. It is better to take a little less and perhaps keep a customer for better times than be hard-nosed and get nothing. As always, document all payment plans.

Four: Compose or improve upon your customer contracts. 

A customer contract that clearly outlines your expectations for payment and the consequences for non-payment will be your best friend. If you are extending credit of any kind, you must have a written contract. 

A contract can assist you resolve customer disputes. It can also lower the cost to you if you end up referring a customer for outside collections. 

Five: Hire a collection agency.

Just as it is not wrong to collect money owed to you during a recession, neither is it wrong to hire a collection agency to collect it on your behalf. Make sure the agency agrees with your approach to dealing with delinquent customers because you do not want to burn any customer bridges. 

Be realistic in your expectations with a collection agency. They cannot change the economic situation of the people who owe you money.  They are, however skilled negotiators and can set the stage for maximum recovery, now or in the future. 

One of my favorite albums is George Harrison’s All This Must Pass. George knew what he was saying:

Now the darkness only stays the night-time
In the morning it will fade away
Daylight is good at arriving at the right time
It’s not always going to be this grey

 Spring came without fail this week. Better times will as well.   We are all in this together. 

 

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