6 strategies credit professionals can implement to secure their cash collection in 2023
Credit professionals are not unused to overcoming challenges. An often-overlooked back-office function, lack of resource and investment can make delivering targets a daily battle. However, in 2023 what was already a hill has become a mountain. With economic insecurity driving an increased risk of default, to protect cash flow, credit and collections teams need to deliver a greater level of proactive credit-control with already stretched resources. In this article we look at 6 strategies credit professionals can implement to secure your cash collection in 2023.
Access Analytics & Automation
All credit professionals know that the holy grail of optimised collections activity is a credit and collections software solution which enables the development of intelligent workflows as well as the automation of repetitive tasks. This can dramatically improve the effectiveness of collections processes.
However, many businesses are yet to invest. Competing business priorities and a lack of understanding of the business benefits of credit and collections transformation has left many credit and collections teams still working off vast spreadsheets. Beleaguered by lack of access to key information, it is not uncommon for teams to simply focus on managing their key accounts working on Pareto’s 80/20 principle. These assumptions can often lead to businesses leaving significant revenue on the table.
Credit and collections digital transformation does not have to be a companywide, multi million-pound undertaking.
Despite the myths, credit and collections digital transformation does not have to be a companywide multiple million-pound undertaking. Platforms such as Power BI can provide touch of button data analytics which enable data-based decisions on how best to improve the efficiency of your collections processes. Relatively quick to implement and costing thousands rather than millions, your business could be seeing improvements in process efficiencies within weeks, ensuring your inhouse team know when and where to make the calls that count and avoid wasting their time on the unnecessary ones that don’t. With a volatile economy necessitating proactive credit-control, making data based decisions on where to make those calls that really count can have a dramatic impact on securing your cash collection.
Know your customers
Whether or not you have credit and collections software system in place, in a period of economic uncertainty, communicating proactively with your customers is critical. In an ideal world you want to touch your customers before they can default and keep cash moving by ensuring your invoice has been received, reconciled and is on the payment run. In a recession even your best of customers may hit financial difficulties. Keeping the lines of communication open, so you understand their financial position and any potential risk for your business, is critical.
Proactive credit-control and debt collection will be critical to maintain cash flow.
Ask and ask again!
In an economic downturn it is critical to remember that everyone will be looking to optimise their cash flow and potentially delay paying when possible. This is when it is important to remember the old credit professionals adage that ‘he who shouts loudest gets paid first’. Proactive credit-control and debt collection will be critical to secure your cash collection.
Utilise the human touch
Whilst we are all closet keyboard warriors, making direct contact with the person who handles accounts payable is also the most effective way to collect on overdue accounts. A call is far harder to ignore than a letter or an email, can enable swift resolution of disputes and establish relationships which can be leveraged to jog your invoice to the top of the queue.
Actively speaking with your customers to understand their internal processes can also help you gain visibility of any barriers to payment and enable you to adjust your billing strategy to facilitate prompt payment going forward. This could include understanding when they usually close their payment run to invoicing smaller amounts more frequently to avoid delays in getting high value invoices approved.
Offer flexible payment terms for customers who are struggling to pay
If a customer is genuinely having problems paying, offering a payment schedule can ensure you at least recover some of your outstanding monies. As well as providing customers with relief that the matter can be resolved, when these customers return to a stronger financial position, you will have earned some customer loyalty that might lead to future business.
If your in-house team are struggling to efficiently service the volume of collections or you have a ledger that needs clearing up, an outsourced credit-control or collection agency can provide a flexible, scalable solution.
With most credit and collections agencies operating on a no-win no-fee basis, with no upfront costs, this can be done at minimal or no risk to the business. Outsourcing can be particularly effective if the business is sitting on a growing ledger of ageing debt – which many firms typically write off after 18 months. With VAT still due after 4 years on unpaid invoices, working these ledgers could have a significant impact on the bottom line.
With high inflation, soaring costs and a recession, 2023 is going to prove a challenging environment for UK business. The Bank of England’s interest rate rises to curtail inflation have massively increased the cost of borrowing for consumers and corporations alike, increasing the squeeze on those struggling to balance the books. Cash on the balance sheet is not the same as cash in the bank and in this environment, it is critical to amortise any ledgers. These 6 strategies credit professionals can implement have the potential to make a significant impact on your ability to secure your cash collection targets within a challenging economic environment.
Ashley Barratt – CEO Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide and unique systems and processes to optimise insolvency recoveries.