While we may slowly be heading back to some sense of normality, for businesses, the repercussions of the last few months may be hitting harder than ever.
The reality is that some companies will be holding out on paying suppliers (potentially your business) to protect their own cashflow. Or, sadly, they may be heading for insolvency – and therefore won’t be able to make payment.
So how do you ensure you still get paid for your services and protect your own cash position?
Clearly you can’t control the finances of other companies, but there are some important measures you can take to try to avoid late payments, as well as some tips on how to chase outstanding invoices effectively.
Adapt to the current climate – and be sensitive
First and foremost it’s essential to acknowledge that we are in extremely difficult times. Now, more than ever, is important for us all to show some humanity and compassion.
That’s not to say that you shouldn’t still chase for payments that you’re owed, but just that it’s worth appreciating that businesses are likely to be suffering more than normal.
While it’s no doubt stressful for you to be out of pocket, chasing invoices in an aggressive or judgemental way will just lead to an even lower response rate – and ultimately delay payment further.
Reaching out with some compassion, and trying to build a repayment plan that’s realistic for both parties will definitely be a more effective approach.
What’s more, these are uncertain times, and showing some kindness now to customers you are chasing may well serve you later down the line.
Communication is key
As we’ve already touched upon, the way in which you chase customers is crucial. And communication generally in a crisis is so key.
The more you are able to keep an open dialogue with customers, the better. Don’t only get in touch when you’re chasing down overdue invoices. If you’re checking in regularly not only will it help customers feel valued, but it can open up a conversation around payments before they become overdue.
As we enter a new phase of business recovery, talking to customers is also another way to make your current status clear. Let people know how and when you’re operating.
And make sure you’re easy to contact too, have a phone number visible ideally (lots of businesses tend to steer clear of this but in troubling times it can feel so important to actually speak to someone). You need to be approachable so that customers feel comfortable to be proactive about payments – and any potential issues.
Have a clear system in place
The size – and stage – of your business will no doubt determine how formalised your credit control process is, and how much resource and time you can dedicate to it.
Nevertheless, whether you have a finance team or are trying to keep on top of everything yourself, a clear system is a must have. There are a number of software providers that can help automate the process as much as possible, to keep it pain free. At Fluidly, our Chase feature identifies invoices that are in danger of becoming overdue – and helps you prioritise who to contact and when.
If a subscription of this kind isn’t an option though, even a series of email templates can help to make the process more streamlined.
Try to make sure you add an element of personalisation where you can though, anything that feels too automated never has the same impact of a message that feels tailored.
Right now you may be in survival mode, trying to fight fires and being pulled in lots of directions. Finding the time to keep a close eye on your numbers might feel impossible, but try to remember that a healthy cashflow is business critical, and being paid is essential for that.
Alongside a good system, try to identify potential problems ahead of time by looking for warning signs.
It’s no secret that certain industries have been hit harder by covid than others, so highlight high risk sectors to keep a closer eye on. You’ll also know what is the norm for your customers. If a regular customer has suddenly drastically changed their typical spend, or seems much quieter than usual, it may be indicative of trouble at the business.
If alarm bells are ringing, chasing payment promptly and regularly will be key to getting paid.
For certain businesses, you may feel that you need to adjust your credit terms going forwards, or ultimately stop supplying to them.
In tough economic times it can feel hard to say no to business, but it’s worth remembering that the time it takes to chase payments also has a value (it’s just harder to easily quantify). And you certainly don’t want to be doing work that you never get paid for. For a healthy cashflow it’s always better to say no to bad business.