How to Optimize Collections during this Pandemic

Coronavirus is a disease that hit the entire World from November 2019 starting from China, and it spread fast to the entire world. The pandemic brought an economic crisis due to the lockdown measures that prompted everyone to stay at the home part from the essential services.

The fact that lockdowns slowed down the transmission, it brought down the world to a major economic crisis that people have continued to experience to date. Singapore is one of the economic hubs was not spared in any way.  Debt collection became a challenge, and the government, consumers, producers were hit hard.

The measures have since been eased and citizens have developed the new norm of living with the pandemic despite it being high risk because most countries have now gone past the COVID-19 pandemic peak.

Debt collection, on the other hand, has had its own share of challenges, but despite all these, there are new ways that have been developed to optimize collections so that businesses can remain afloat.

After a deep research, we came up with several ways on how collections can be optimized for profitability to be experienced once more. This article will elaborate further on these points and see how businesses and consumers will be able to manage their financial crisis during the coronavirus pandemic times.

  1. Negotiations between the customers and the business owners on the payment terms.

Coronavirus found businesses intact and there were no plans made when the original contract was made. On the same note, contracts signed before the pandemic did not put into consideration of an economic crisis.

It’s therefore critical to consider negotiating new terms that would be favorable for both the client and the business owner so long as the agreement lies within the credit policy that is in force within the company.

When customers realize that business owners have their interest at heart, and they would wish to have long term collaboration with them, they too will sacrifice and offer their best to pay off their debts.

This is exceptionally important for business growth, and especially in times when people do not want to risk so much of the finances before collection is made.

  1. Encourage early payments as early as possible.

Early payments can be encouraged by offering discounts to customers. For instance, a business person can opt to give a 3% discount for any amounts paid within the first 30 days, 1% for amounts paid within the first 45 days and the like.   During these times of economic hardships, customers would feel appreciated and also love to go further to pay earlier for such credible discounts.

  1. Analyze the portfolio to assess how well the available customers can pay.

One of the most important factors in debt recovery understands the customers. This is because not all of the customers have had a challenge in repaying their debts.

If we take the three types of portfolios to analyze the portfolio these are;

  • The good customers- These are the ones that have not had any challenge to make their repayments. They pay promptly even without a reminder. These should be categorized as good customers and managed continuously to ensure that they do not regress from active debt repayment.
  • The fair customers- These customers have been affected by the pandemic but can pay not necessarily at the exact repayment day, but they do not go beyond the watch period.
  • The bad customers- Possibly these have been fully affected by the pandemic and their businesses went to an economic shutdown. However, strategies of reviving the economy have been put in place in Singapore, and every business has started picking.

These customers need to be watched, reminded of the repayment date and visited for collections.

These are some of the strategies that one should emphasize when making the collections to manage all the clients at hand.

  1. Engage a debt collection agency to collaborate with the available staff in the company.

In Singapore, there are reputable debt collection agency that would be of great help to support the company’s debt collection department. This is because the available workforce may not be sufficient enough to collect all the debts, or the customers went into hiding.

The debt collectors in such a case will implore strategies that will help trace such poor payers, list them to the credit bureaus and help the company recover the debts.

On the same note, capacity and efficiency are also given a top priority chance as compared to working alone.

  1. Restructure the accounts receivable policy and processes.

Indeed, the policy in place was made before the pandemic struck the world.  Business people should not hold on to it but look for a way to restructure for it to fit in the current economy. Restructuring could not only help the customers repay more amicably, but will help the management to manage the working capital and arise the business more strongly.

Some  methods that can be used during the restructuring of the credit policy are;

  • Proper monitoring of the debts.

This is whereby the staff in charge of debt collection should keep checking the outstanding debts daily if possible enhance cash sales method by direct banking and also work on the ageing balances which are on the watch so that they do not spill over to the next watch period which might pose a greater risk to the organization.

  • Proper recording and capturing of the customer’s data.

Apart from restructuring the credit policy, ensure that all customer data is available and updated at all times. Failure to manage the data will lead to debt, fraud and closure of customer’s contracts for competitors. This is not a time that customers should leave for competitors.

To prevent staff fraud, any change in the customer’s data must be authorized by an authorized staff that should be answerable in case of any missing payment, doing this will enhance collections in a better way and a monitored process.

A question may arise, what if the pandemic worsens?   We do not hope for the worsening of the economy because of the pandemic. Still, in case of such an eventuality, there is need to engage customers for short term payments rather than considering writing off the accounts which will be sustainable in the future.