Editor’s Note: This is a guest article from the Executive Management Team at Rauch-Milliken International, Inc. about the challenge of managing collections on overdue accounts during coronavirus. View more construction industry resources on dealing with the COVID-19 crisis.
As we know, the global pandemic caused by COVID-19 has changed everything as we previously knew it. Schools are under mandatory closure in many states, while restaurants and bars have been asked to restrict hours of business and to limit the number of guests they will serve. In some cases, they have been forced to close their doors altogether.
Most major corporations have ordered non-essential staff to work remotely from home. Families are now juggling work schedules and childcare. In many cases, their ability to earn a living has been compromised.
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The coronavirus pandemic is not business-as-usual
The global supply chain has experienced interruptions, slow-downs or in some cases, a temporary halt to producing goods. The major professional sports leagues have cancelled or postponed their tournaments, events, or seasons.
The global economic impact of the pandemic is already massive and will soon eclipse the trillion-dollar mark. No health crisis in modern times (Ebola, SARS, Swine-Flu) has had such a devastating impact. These are scary and unchartered times, to be sure.
Has your project stopped due to Coronavirus?
As credit and receivables management professionals, we are tasked with conducting our business to the very best of our abilities, under these volatile circumstances. We will have to rely on our instincts and best judgment as we work to protect the receivables of our employers. And here at RMI, to project our clients who entrust their under-performing A/R to our care. As with any crisis or time of uncertainty, there are sure to be unethical types who will attempt to capitalize on the situation.
What to expect when you’re collecting during COVID-19 crisis
Expect a slowdown in payments and an increase in Days Sales Outstanding (DSO). This is the natural course of things and cannot be avoided.
When a customer does not make a payment or is late in doing so, consider that customer’s credit history. If they have always been reliable payers, it will be prudent to show them compassion and flexibility.
Many companies are placing a moratorium on charging late-fees or interest during this time. An across-the-board freezing of these penalties is a prudent and admirable approach. You can always reinstate normal, contractual terms once the world has found a path forward, leading to business as usual for most companies.
Collections during coronavirus requires compassion & common sense
When a customer with a poor or erratic payment history attempts to use the COVID-19 crisis as a justification for non-payment, the credit professional is well within ethical grounds to point out to the customer that they were already in arrears prior to the pandemic and that they had not paid you when business conditions were ideal.
You may even wish to express to them that you find it very disappointing that they would attempt to use the pandemic as a smoke screen to justify their previous poor payment record. This is the common sense piece mentioned in the subject line above.
Outsource accounts that were delinquent before coronavirus
Customers that were more than 90 days delinquent as of February 1, 2020 are those who were not paying long before the coronavirus was a factor. They should not be permitted to use this as an excuse.
Please remember that with these customers, they typically do not only owe your company. They often have multiple creditors who aren’t being paid. The creditors who act most swiftly and decisively will drain the available funds while those who employ a passive approach will likely see no recovery on their receivable.
Approach collections with common sense
Please let me emphasize that our management team believes wholeheartedly that this is a time for great flexibility and compassion, whenever it is warranted. Absolutely give your good customers the “Benefit of the Doubt” and agree to work through this with them. Their excellent credit history has earned them this consideration.
Conversely, your customers who have been problematic in the past have not earned that same level of trust. Your company’s interests are in serious jeopardy with each passing day. Decisive action is prudent with these customers.
Take a compassionate customer-centric approach
RMI offers customized programs for any situation. Our RMI CustomerFirst is a perfect way to establish a friendly reminder, customer-centric treatment plan for your receivables. This is a pre-collect option where RMI serves as an extension of your company, providing statements, invoice copies and dispute resolution, when needed. We provide your customer with everything they will need to place your invoice(s) in line for payment, driving maximum cash receipts and customer retention.