Webinar
Cash flow is king – recovering debts
Cash flow is king – recovering debts
Collecting overdue debts and reviewing aged debts should always be a priority for any business. However, as we navigate our way through this current crisis, and the UK begins to take tentative steps towards an increase in economic activity, now is the time to look at adopting alternative cash collection strategies when faced with customers with financial difficulties.
This webinar will highlight the tools that are available to support businesses with recovering debts owed to them, as well as address current burning questions such as how to prioritise which customers to chase for payment and what steps can be taken to try an avoid bad debt in the first instance.
You can view past webinars at SHMA®ON DEMAND or read the latest news and views from Shakespeare Martineau
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Jayne Gardner
Partner & Head of Debt & Asset Recovery
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Webinar transcript
(Please note this is auto-generated and un-edited)
0:41
Hi, I'm Jayne Gardner partner and head of the debt and asset Finance team here at Shakespeare Martineau. Welcome to today's webinar, which is cash flow is King one sort of housekeeping point that I just wanted to deliver was you will see a Q&A icon on your screen.
1:00
Please do use this to ask your questions and we'll respond to you after the session. It's an old saying and sometimes it can be overused.
1:08
But at this point in time for a lot of businesses across many sectors cash really is King the evolving package of business Interruption loans announced by the government including products such as bounce back loan CBI LS and lcbi LS and the future fund as well as measures such as the deferment of the JT payments have proved to be vital survival tools and have been welcomed by many of the UK's large small and micro businesses enabling them to keep the lights on in many cases. However, cash flow outside of the current pandemic was always key but now it's more important than ever. So, how do you keep the money coming in Paramount importance? Keep in contact with your customers many may be struggling with their own.
2:00
Situation if you can reiterate your payment terms be that 30 60 or 90 days and make sure you invoice on time and collect on time. If you have absolutely key customers communicate with them from day one and if they are struggling proposed a payment plan if they haven't approached you already.
2:22
Please do approach them things will get better but it's likely to take some time and customer engagement is key.
2:31
Another key factor is review your current credit policy ensure all your staff are aware of it and what then happens when an invoice becomes overdue when a customer exceeds your payment times, if a customer doesn't pay after a certain amount of time it may be also be necessary for you to Come on, stop and actually cease to provide them with those goods or services until payment has been made and if this doesn't elicit payment, this may be the stage when legal action is required to encourage payment as the UK begins to take tentative steps towards an increased economic activity now is the time to look at adopting alternative cash collection strategies when faced with customers with financial difficulties.
3:23
Every business wants to stay in business and your chosen strategy will very much depend on the profile of your customer base. What is key though is that you identify swiftly and early on who owes you money and you work with them to ensure you are not the one that unduly suffers from what is an extremely challenging situation for anyone.
3:49
You may be wondering one point that a lot of businesses. A lot of clients are asking at the moment. Should I be chasing my customers for payment in this current climate? The answer to that question is a resounding. Yes, when you're chasing your customers or communicating with your customers, you must treat them fairly and reasonably, but you must not let covid-19 blur the entire situation.
4:19
Ocean you need to have a priority to your business and that's to keep your business safe secure and active and the way to do that is you must monitor your customers situation. So should you prioritize or how do you prioritize which of your customers to chase?
4:39
Well, depending on the type of business that you're in for example, if you're an FCA regulated business then you may want to Split your your customers into two pots pre covid post covid. So what I mean by that is if you have any customers that were already indebted to you, they'd already exceeded their payment terms before this situation arose then yes, you should prioritize those because irrespective of the current situation their debts are older.
5:16
So any customers that have fallen into a rears sort of post covid or at the star or during this situation then you may want to look at those differently from a business to business perspective. The most obvious thing to look at is the type of business that your customer is in because that may well affect how how robustly you chase or even the strategy the internal strategy that you adopt.
5:45
To seek payment. So for example, if your customer is a brewery or anything in the hospitality industry or a retail premises, then the they may not be functioning at all or as normal. So whilst I apologize if this sounds obvious, but if your normal medium is to send letters then sue them.
6:08
We're actually we're finding first of all the obvious one is don't just send a letter by Send it. Also by email being will help us determine which businesses are trading and which ones aren't because whilst the business premises itself may be closed staff are likely to be all eight. At least a skeleton staff are likely to be working from home. Therefore. The email is likely to be picked up and is more likely to elicit a response.
6:40
So one of the key steps that you can take at this time or in Any time actually to avoid bad debt is to look at your internal collections process. Is it is it tightened up is it managed properly? Have you got a good robust process? So for example, if you supply widgets to your customer you would you phone the customer to check that they've received the widgets or product or service did everything go? Okay. Were there any problems is?
7:15
Is everything to your liking record that information on your system make what we call a fully contemporaneous far note which sounds a bit of a mouthful but make a note what the customer tells you at the time that they say it because that may be useful further down the line if the customer subsequently doesn't pay and unfortunately, you have to take action. So give them a quick call and then again when you send your invoice out, oh hi hi.
7:45
You received the invoice as it gone to the right person. Do I need to resend it anywhere else? When's your next payment run that sort of thing? What are your payment terms don't necessarily feel. So if your payment terms are 30 days don't necessarily feel that you've got to wait 30 40 days to contact the customer again phone before your terms are acceptable.
8:15
Seeded particularly in this current climate look at your customers previous payment history have they changed any of their processes? Have they changed the date that they pay you have may well be that their personnel has changed because they may have had to furlough some people. So make contact with that new individual try and build a relationship with them.
8:46
How is your customer change Banks now that may not necessarily be for any any negative reason but it sometimes can mean that the current Bankers withdrawn facilities. So if your customer does or has changed their bank or their pattern of payment that may be a red flag.
9:06
Not generally, you know, I'm not saying it is across the board, but it may well be a red flag, so please keep your eye on it and just any Any any change in your customers activity, please?
9:18
Please monitor it now when you have exceeded your internal collection process if your customer hasn't paid perhaps in this current climate, you may want to take a little bit more time and try and make contact engage with the customer rather than just follow a stringent letter one letter to but also You may wish to consider just trying to get a bit more in-depth contact with your customer to try and get under the skin of what the problem is, is there a problem or not. Can you work with your customer to resolve it now, if you cannot get payment from your customer, can you still pass your debts for collection via a third party but firm of solicitors or debt collection agency which ever you prefer?
10:15
To utilize. Yes, you can now there are lots of different theories flying around at the moment. Should I chase - should I not particularly going back to the FCA regulated clients should should I chase customers if they they've said they want to take a payment holiday, that's fine. Obviously if customers are able to take a payment holiday.
10:40
You are offering a payment holiday and your customers elect to take Payment holiday, obviously, you have a duty to allow them to take that that period but make sure that your customer knows that yes, they can take one to three month payment holiday, but they are going to have to pay this money back. Eventually. We have one large client at the moment FCA regulated that that was absolutely inundated with their customers wanting to take the payment holiday.
11:15
As soon as they took the time to have a conversation with that customer and explain yet. That's fine. Fully understand happy to provide that payment holiday, but we will require payment over the next 6 to 12 months. So that means we will be looking for you to resume paying X or Y it may or may not surprise you that quite a lot of customers either change their mind totally or work with.
11:44
Customer and actually paid a reduced payment for that period they didn't elect to pay nothing.
11:51
So it just comes back to the point engage with your customer take a bit more time to have a conversation with them get to grips with their financial situation whether your customer is an individual or a business and hopefully you will be able to come to a resolution with with them without having to pass to a third party but going back to my My point at hand if you can't collect the money, can you do anything in these current times? Then the answer is yes, you can we are still taking legal action for customers. There's sorry for clients against their customers and there is no reason why you can't as with yourself. We are adopting a bit more of a customer engagement strategy.
12:41
So if pre covid We receive an instruction and a client says do letter one or just one letter. Then I want you to issue Court proceeding straight away. We are taking the time as you would no doubt to look at the customer. What business are they in? How are they likely to be suffering try and make contact with them and try and get a resolution without going to court your credit control Personnel. They will know how they will.
13:14
I recognize when there's a problem. They will alert you to it and act on it but this works both ways. Now you as a business maybe yourself experiencing financial difficulties.
13:29
Now if you are exactly the same applies to you still remain focused on your cash collection, but if you owe money to your suppliers, then the advice I give you is to pick up the phone and speak to them engage with them because I have you probably won't be surprised to know that a lot of your suppliers may find themselves in exactly the same.
13:59
the same position explain the situation if your terms are usually 30 days and you can't afford to pay all or part of your debts for 30 60 90 days speak to them try and put a payment plan in place because they will appreciate your openness and your honesty with them same applies to your landlord speak to your landlord if you're in difficulties and try and make arrangements with them whether you A business that is is struggling to meet your suppliers demands or whether you have got customers that are struggling to pay you speak to them engage with them now coming back to if you are owed money from by your customers.
14:50
Make contact with them try and engage with them. Don't let the covid situation persuade you that you can't contact anybody. You can't ask anybody to pay money that they owe because that is certainly not the case this situation highlights the importance of monitoring your customers and chasing your customers for payment. If you do not keep a handle on what customers owe you and how you are.
15:20
How your strategy will enable you to collect that that could affect your ability to keep your business in business.
15:28
It really is as simple and straightforward as that, I would suggest that you move forward with the thoughts and understanding that most of your customers. If not, all of them are experiencing some financial difficulty themselves at this moment. Therefore if they only have a limited amount of cash that they can part with we want to make sure that you are at the front of that queue.
15:56
So by making Sure that as soon if you as you provided the customer with the goods or service you pick up the phone. Is that okay? Everything? Okay send the invoice has it been passed a payment? When am I going to get payment if you don't get payment by that day get on the phone or is there a problem?
16:17
If you if you have any concerns about your customers ability to pay act on them quickly that is of Paramount importance at the moment. You cannot afford to sit back. Oh, they used they'll pay eventually while they might not because you do not know what is going on in the background at that business. They may be struggling to keep the doors open either literally or metaphorically on a day-to-day basis.
16:44
So what you need to do is mitigate, Get your loss. So if a customer owes you money if they can't afford to pay all of it. Can they pay some of it? Can you get them onto over a payment plan monitor that payment plan monitor it closely and the point I made earlier if any customer that has changed their their previous payment habits explore that question. It has their Bank the bank changed.
17:11
Why ask the question don't be afraid to ask the question provided you ask the tune in the right way. There is no reason why you can't ask your customer any question whatsoever. Because if they've got nothing to hide they will be happy to give you the answer. If anyone would like further help in developing a cash collection strategy. Please contact me put a question at the end and I will be happy to help now. We have launched here at Shakespeare Martineau a free helpline, which gives you direct access to the relevant.
17:47
Near team of experts in our business who can provide you with free legal guidance by way of a 20-minute telephone or video call and I think the details are going to be put on the screen. If you'd like to book a session. They can help you guide you through whatever help and support your business may be eligible for which obviously is, you know is likely to be of a help to you. Please do keep your eye on our webinars and our website as we do have advice helpful.
18:16
Lines, which may be useful to you, and we are putting out weekly webinars on topics, which we hope will be helpful and useful so that brings us to the end of this webinar. I hope you found it useful and relevant in the current circumstances. If there was something that you would like further information on or you have a specific query on any matter that you'd like to discuss. Please do let me know and I'll be happy to help. Thank you.
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