The UK has entered an uncertain November, with the government announcing a nationwide second lockdown to halt the progress of the coronavirus. In such precarious times, responding with better credit control can make a big difference.
The third quarter was more positive for Britain’s economy following the first national closure in spring. But now the country’s economic recovery and the fate of businesses are facing renewed trouble – with nobody quite sure how long it’ll last this time.
Let’s explore what this new lockdown means for the UK economy, and discuss cashflow management options for small and medium businesses in particular to get through the tough times ahead.
What does a new UK lockdown mean for the economy?
The Prime Minister’s complex tier system of differing regional restrictions was not enough to stop a dangerous spread of the virus across the country. Businesses that were otherwise able to stay open in areas with lower risk levels will now have to close as they did earlier in the year.
With this restriction on economic activity, as well as the renewal of the Chancellor’s furlough scheme, this is inevitably going to affect the nation’s finances.
According to the New York Times, the International Monetary Fund (IMF) have downgraded its forecasts for the UK economy. They predict an annual decline of 10.4 percent, and just 5.7 percent growth for 2021.
The outgoing chief of the Confederation of British Industry (CBI), Carolyn Fairbairn, expressed her worries about the impact on jobs and businesses. She warned that without timely measures such as a “national commission for economic recovery” to put fiscal management in place, “permanent damage” could ensue – especially with the Brexit transition period ending in January.
All these figures look pretty bad, but it’s hoped that this second lockdown won’t be quite as disastrous as the first. For one thing, schools remain open, leaving more parents free to work. We’re also more used to measures now, working remotely and keeping essential services up and running.
Many European countries have also shown an increase in people starting their own businesses.
So it’s not all negative. But for those SMEs who had weathered the storm and thought they could see clear skies on the horizon, it’s cold comfort – even with extended support measures.
How can SMEs help themselves?
The government is extending its business support schemes. However, the key question in this uncertain climate is: what can businesses do to keep themselves afloat? A lockdown of four weeks is the minimum prescribed, with the Institute of Fiscal Studies expressing doubt that it will end then.
In times of recession there are areas of every business that need to be tightened up to ensure survival. SMEs will already have addressed many of these in 2020.
Here are some further tips to help SMEs manage their debts and cashflow, to see themselves through to the other side of UK lockdown 2.0.
Managing Credit Control Better
Getting invoices paid on time can make the difference between making it through a recession and not. It’s essential to be on top of your credit control management so you can spend your time doing the things that actually make your business run.
As a small or medium enterprise, an efficient system of credit control means you’re not using vital scarce resources to chase money that should be powering your business.
Once a customer’s invoices become due, every day that they’re unpaid is at your expense. But as you’ll know, credit control involves a lot of moving parts for a small team to keep track of across multiple customers.
The best way to better manage your credit control is to automate it.
Automated (yet personalised) emails to appropriately chase customers whose debts are outstanding will save you a great deal of time and stress. Communication is the number one task that SMEs have to manage when dealing with their credit control processes.
A powerful automation system allows you to consolidate invoice communication, schedule chase emails and prepare human-like templates to be sent out in order to maintain important relationships.
Another tool of automation software is the ability to manage customer insights, so you can differentiate reliable payers from those who are too risky to grant credit to in future.
Credit control measures like these may seem trivial at first. But think how much effort goes into your accounts receivable tasks when doing them manually, and how much more productive automation could make you.
Outsource Credit Control
Automation is fantastic, for the reasons we’ve just outlined. Outsourcing to a partner who understands the automation software and has ready-made processes, custom email templates and the experience to help you revamp your credit control is even better!
At Chaser we have helped businesses save 15+ hours a week through email chasing software. On average, companies who use our automation services report getting paid 16 days sooner, resulting in massive increases in cashflow.
Small or medium businesses may not have a separate accounts receivable team. As a business owner you might be devoting a day or two every week to the accounts yourself, a significant part of which will likely be chasing due invoices.
With Chaser you outsource your credit control to our cloud-based technology. This has allowed us to help chase over $3bn in overdue invoices.
The cost savings of outsourcing your credit control tasks will speak for themselves. And since Chaser software handles all communications with customers sensitively and in customised, pre-agreed times, you can concentrate on managing your business through the lockdown.
Don’t rush to write off debt
It can be tempting to give up on chasing if you’re spending more time writing emails and making phone calls than actually doing the work your business requires. Our advice however, is not to give up!
No-one really wants to write off debts. When you sell your goods or services to customers, no matter how loyal they are or how strong those relationships, you need to get paid. Almost everyone is squeezed during a recession, and it can be tempting to let invoices go for customers who’ve had good credit in the past.
But it’s a slippery slope. Being in a downturn is all the more reason to press for your debts to be paid–and in a timely manner.
A customer who tries to wiggle out when things get tough by leaning on your historical good relationship is not a good customer. Not only that, they’re risking future business with you if it ultimately leads to you going bust!
Rather than write off debts owed to you, try to escalate collections. Of course we don’t mean go on the offensive with customers you’re on good terms with. Rather, there’s a businesslike way to broach escalations that encourage reliable payment and maintain these relationships.
If debts get so bad with bad payers that you’ll never risk selling to them again, you’ve got nothing to lose with a more firmly worded email. But when it comes to normally prompt payers, Chaser has inbuilt systems, wordings and schedules to delicately–but persuasively–escalate due invoices to more senior people in debtors’ organisations.
By syncing with your accounts receivable IT system, Chaser can take over all the work of debt collection escalations. We’re able to tailor the right approach depending on your relationship with a customer and the level of escalation required for any given invoice.
This gives you the peace of mind to know that your debts are being chased sensitively, which you might otherwise give up on when resources are scarce.
Call Chaser today to find out what we can do to help your business make it through the next period of Covid lockdown with your debts promptly collected. In a year of anxiety and stress, let your credit control be one less thing to worry about.