3 ways to support COVID-affected customers – and still reduce late payment

01/04/2020

As the country comes together to support one another through the challenges being posed by the coronavirus (COVID-19) pandemic, many businesses are finding themselves in a difficult position.

With cash flows being stretched, it remains important that businesses continue with their credit control strategies to obtain timely payment from customers.

But when customers are facing cash flow problems of their own and are worried about their immediate futures, it can be difficult for credit controllers to apply the sort of pressure that may be required to secure payment – and therefore protect their own business.

Similarly, should long-serving customers not be able to survive the pandemic, there will be a longer term impact that will be felt even after things return to normal – whenever and whatever that may be.

And for those customers that do survive, the personal and measured approach you adopt now will be remembered and appreciated by them – especially if it helped them to keep trading – and really boost your relationship and customer loyalty going forward.

So what steps can businesses take to support customers most affected by COVID-19, whilst ensuring they get paid for goods and services supplied?

1. Offer a short payment extension

If you believe a customer is genuinely unable to meet your invoice due date, and applying additional pressure will only cause friction and damage the relationship, there’s little benefit in taking a hardline stance.

Many businesses will be facing short-term cash flow gaps at the moment, but that situation might improve when they receive payment from one of their own customers or perhaps benefit from one of the government’s new support measures, like a grant or a government-backed loan.

The key thing is to talk to your customer and find out when they will be able to pay your invoice. If this date isn’t too far into the future – and crucially fits your own cash flow requirements – you could offer to extend the payment terms until then, and stay in touch throughout that period to ensure that won’t change.

2. Agree a payment plan

Some customers will be faced with longer term cash flow and affordability issues and, especially if your invoice is quite high in value, any payments they receive in the interim may not result in them being able to pay you.

What can help in this situation, however, is to agree a repayment plan over a number of weeks or months. Find out what they can commit to, and ask the customer to set up a standing order to ensure payments are made in the background.

Whilst ensuring that you receive payment for the goods or services provided, the smaller sums should be more affordable to the customer and could be the difference between them surviving the downturn or not.

Just be sure to get what you agree in writing, that can be used in the event you need to pursue legal proceedings in the future.

3. Give customers a payment holiday

By no means the first choice, given it increases the level of risk to your business, in certain situations you might consider giving your customers a more lengthy payment extension.

This could be an option if you’re confident that your business’s cash flow won’t be affected by the delay in payment, and perhaps they’re a highly valued customer you’re keen to support at this time.

If they pay for your services on a monthly subscription basis, for instance, you could offer them a short payment holiday – perhaps for a couple of months – until the impact of the pandemic becomes a bit clearer.

Just be mindful of the fact that, should they enter insolvency in that time, it will be difficult to recover payment from them and might result in the debt being written off. But it should increase customer loyalty if any extension simply helps them to regain their feet.

Can (or should) my business actually offer this support?

There’s a fine line between being flexible to support customers and creating cash flow problems for your own business, with a number of pros and cons to each approach.

The key thing is to understand the importance and value of that payment to your business before you consider offering any of these support measures.

By speaking to customers directly and understanding their circumstances, it is often possible to identify which are genuinely unable to pay your invoices at the moment and may benefit from some assistance, compared to those who wouldn’t and either pose a risk to your business or are simply stalling on making payment.

And remember, should recovering payment from customers be consuming too much of your time and creating cash flow headaches, it can be beneficial to outsource these debts to a specialist debt collection agency.

At Hilton-Baird Collection Services, we use all our experience and personal approach to bring positive and fast resolutions, with a focus on recovering payment for our clients whilst preserving their all-important customer relationships.

Contact us on 0800 9774848 to discuss any challenges you may be facing, or get an instant debt collection quote to discover what we’d charge to successfully recover your overdue invoices.