Keep calm, but don't just carry on - how to adapt your credit control in the time of Covid-19

4 min read

The world's media is a cacophony of Covid-19. I'm struck by the level of doom-mongering and panic instigating posts I see across social media. This is not one of them. Its intention is to provide some balanced, actionable and above all useful advice about how you should be operating your credit control in the time of Covid-19. In recent weeks, a number of our users and Accounting and Bookkeeping partners have been in touch with us as Chaser. They wanted our advice about how they should be conducting their credit control in the more challenging economic backdrop that Covid-19 is precipitating. I'm really proud we have that type of relationship with them, and this post makes that advice available to anyone and everyone who could benefit from it.

It's been over a decade since there's been a comparably harsh macroeconomic backdrop to carry out credit control in, so some of you won't have experienced this before. For others, carrying out credit control in harsher times will be like knowing how to change a flat tyre on your car - something you've done before, but not for a long time. And the knowledge has grown rusty, because who likes to think about having to change a flat tyre when your car is running perfectly well.

I've worked in credit control for nearly 15 years. I remember the 2008 Financial Crisis when I was at Deloitte and the meetings we had to discuss our approach to getting our fees paid and manage our exposure to at risk clients. We’ve been through this type of uncertainty before, and we will get through it again. But only if we’re reactive and adapt** to the changing situation.

Credit Control

Whether you're experiencing credit control in a tougher economic climate for the first time, or in need of a refresh, here is some practical and useful advice:

  • Get your sales invoices out. Credit control starts with getting your sales invoices raised and sent to your customers. Look for any ways you could be accelerating this. An invoice can only be paid once it has been issued.

  • Carefully consider and decide what payment arrangements you can offer to your customers. Depending what industry you are in and who you sell to, your customers may be experiencing cashflow issues themselves. Look at whether you could offer extended payment terms or instalment payment plans. You will want to support viable and good customers who are going through a Covid-19 induced cash crunch.

  • Contact your customers. Firstly to find out what impact Covid-19 is having on their regular processes. Whether you should be contacting a different person via a different medium to normal, for example. This will give you the opportunity to have an up front discussion about the payment arrangements you may be able to offer them (see above). In prioritising who to contact, you want to consider two things:

1) How much you sell to them (monetary value)
2) Whether, given your knowledge of them as a business and what they do, they are more likely to be affected by Covid-19 (e.g. an airline vs a mobile phone network).

  • Be vigilant. Yes, make sure you are running your credit checks on key customers. But changes in credit ratings are invariably lag indicators of worsening financial health. What you really need to be paying attention to is how long your customers are taking to pay, their DvD (Days vs Due-date). Make sure you are reviewing things regularly enough to pick changes up so you can act on them.

  • Communicate internally. Make sure your Commercial and particularly your Sales team are aware of the situation with ongoing customers. Who is behind on their invoices. Who is on a payment plan. Put a system in place for communicating this information so that those teams can make informed decisions about future sales. You absolutely want to avoid a situation where your business makes a new sale to a customer that they wouldn't have made had they known about that customer's credit control situation.

  • Review your process. This is a great time to review your entire credit control process to ensure it is the best it can be. From invoicing, getting purchase orders, to credit checking and risk profiling, through to how you chase. And then how and when you escalate to legal and debt collection. Take this as an opportunity and forcing factor to really interrogate your process.

The American pastor Charles Swindoll famously said that "life is 10% what happens to you and 90% how you react to it". That is true of credit control at any time, dealing as you are with a raft of different customers and their respective actions. It is especially true in credit control today against the economic backdrop of Covid-19. The changing a flat tyre analogy is a good one. It's a tougher economic backdrop. You need to react and adjust. People rarely regret taking decisive, but considered action too early. But don't overreact. A flat tyre does not mean that the entire car is broken. So my final advice is this:

Don't procrastinate. But don't panic. Read and react to the situation and update your credit control approach as necessary.

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