As the COVID-19 pandemic spreads across the globe and begins to affect the day-to-day operations of businesses across the country, companies must grapple with a new normal in terms of how to approach extending credit and managing customers. Ultimately, you will often have to rely on your “gut” as you try to protect your business. To that end, here are 3 ways your company can maximize receivables while using a bit of common sense balanced with compassion.
- Prepare for a decrease in payments. Some people will simply not have the funds to pay at this time and this is to be expected when disasters such as the one we find ourselves in occur. Did you know there are technology tools to help you monitor your accounts? You can set them up to be alerted when customers are struggling to pay others, thereby allowing you to be proactive in reaching out and working with them on repayment terms. You may even consider setting up alternative methods of payment, such as via credit card, bank draft, etc. for companies working remotely that cannot send out physical checks.
- Be flexible. Take a customer’s credit history into account when they fail to make a payment or are late in doing so. Those that have consistently and reliably made payments deserve some flexibility and compassion. During times like these, it’s important to work with some of these small businesses and speak with them personally to keep the lines of communication open. It may make sense to stop charging interest or late fees on a case by case basis for good customers who are suddenly struggling or even freezing these penalties across the board for this customer segment. And if possible, you might even consider taking partial payments or working out a plan for no payments. Remember, your normal contractual terms can be reinstated after the world emerges from this pandemic. If you are a commercial lender, you can demonstrate your flexibility by considering loan modifications for borrowers affected by the coronavirus such as payment deferrals, fee waivers, extensions of repayment terms and other more insignificant payment delays.
- Don’t be taken advantage of. You will likely encounter situations where a customer with a spotty or downright poor payment history uses the Coronavirus crisis as yet another reason not to make a payment. In this case, it is ethically acceptable to make the case to that customer that they had issues prior to the pandemic and were late or didn’t make payments when times were good. What’s more, customers who were more than 90 days delinquent as of the end of January 2020 should not be allowed to use COVID-19 as an excuse. The truth is these customers likely have multiple creditors that they aren’t paying. If you want evidence of this, you can always pull another business credit report to see how long the company has been struggling to make payments, if the problem is specific to you or if they haven’t been paying others as well.
This pandemic is certainly unsettling and the uncertain impact it will ultimately have on businesses is worrisome. Nevertheless, there are ways to be good corporate citizens while protecting your own business’ interests. Prudence, compassion and common sense should rule the day.