The current state of the economy is troubling to say the least. We’re all dealing with the same unfavourable circumstances—for many, customer spending has been at an all-time low while businesses are left with no choice but to lie low on their collection efforts. However, many businesses don’t realise that on average, outstanding receivables counts for approximately 50% of a business’s assets.
In times of hardship, it’s vital to be able to access these assets, but how can this be done while remaining compassionate to your clients? In this blog, we discuss ways to handle your accounts during an economic downturn.
Discuss payment terms early on
Treating your clients with care and compassion is a given; this should not change even when faced with more turbulent times. A responsible business owner should complete the front-line work from the very first stages of your relationship. Even before extending credit, your customers’ credit applications should give you the necessary information to review their financial capacity. It’s best to set credit terms and conditions in detail, and these should thoroughly explain the responsibility of clients for all collection fees if debt exceeds credit terms. It’s crucial to be transparent in the very beginning so that it’s easier to collect an outstanding debt when necessary later on.
Encourage clients with attractive incentives
When cash is tight, clients may put paying debts in the backburner. Instead of nagging customers to complete their payments on time, you can encourage them to initiate payments with an incentive. Look into different ways you can reward clients who make on-time payments. Whether you offer discounts, gift certificates, or points, you can save time and effort chasing bad debts and make customers more willing to pay, leading to increased customer satisfaction.
Monitor customer behaviour
A way to minimise difficulties when the economy becomes unstable is to monitor your clients’ behaviour. This gives you the chance to seek signs of trouble early on. Have their paying habits changed? Have they attempted to cancel a transaction, or have they defaulted in any way? A slight delay could turn into an unpaid receivable and a collection problem later on, so it pays to be attentive to your customers’ spending habits.
If you suspect there’s a problem, address it early on. Provide an updated credit report, and communicate the issue with your customer immediately. If needed, you can either get additional help from a third-party collector or open up payment plans to accommodate specific circumstances.
Consider flexible payment terms
You will find that often, loyal customers do want to pay their debt, but are just having difficulty. While it’s essential to enforce the payment terms you have agreed upon, you can consider working out a payment plan for your customers who are willing to pay but can’t at the moment. Put this plan into writing, and detail the new and amended terms, including the amount they will pay, the timeline of payments, and interest rates.
Partner with a third-party collector
Collection can prove much more challenging during an unstable economy. This is where a reliable collection agency can help you improve your company’s bottom line. Partnering with a third-party collector allows your business to minimise losses. Turn over your past-due accounts to an agency, and let them maximise recovery on past due accounts. On that note, it’s also critical for you to choose a collection agency that has extensive experience with collection and practises the same set of values, ethics, and standards as your company, preserving your relationships with customers.
Maintain a steady cash flow with Bartercard
Implementing specific measures to boost your Accounts Receivable collection efforts can put your business ahead of the curve. It can save you from the stress of trying to track down late-paying customers and help you avoid a cash flow crunch when a recession hits.
Reinforce your business’ cash flow during these challenging times with Bartercard. By joining Bartercard, we can help you conserve your cash by allowing you to barter-trade with thousands of businesses, using trade dollars. Enjoy cash-less transactions and join today!