Collections Strategies during COVID need to be radically different because the change is unprecedented. Companies like Ferrero have already implemented AI and RPA in their process and are ahead of others.
Based on invoice tracker statistics, in Europe, the % of invoices unpaid moved from 16% pre-COVID to around 30% in April and jumped to 53%+ at the end of April. In this scenario, it is very tempting to go aggressive on collections given the short-term liquidity demands. But will it yield results especially when your customers are genuinely affected?
Collections teams around the world have suddenly found themselves in a critical position helping to stabilise cash flow. But with AP teams on the receiving end trying to do the same, this unique situation has required a different approach to the norm; more granular and tailored based on knowing customer histories, their industries, using segmentation and prioritisation and applying a good dose of humanity.
In a recent webinar, Highradius focused on “Cash Flow Vs Customer Loyalty” which collectors should prioritise and the thin line between perseverance and empathy. A group of experienced professionals shared their insights and Collection strategies that would help collectors in a dilemma and take strong decisions.
Eefje Van Craen is the Head of Risk Solution CEE at Bureau Van Dijk- A Moody’s Analytics. BvD is a major publisher of business information and specialises in private data combined with software for searching and analysing data. She did a major analysis on Impacts of COVID specific to industries and portfolio analysis and customer segmentation during COVID.
According to the study conducted, it was inferred that General sectors like Automotives and Construction were severely affected by the Focus sector in manufacturing vehicles and construction of residential and non-residential buildings heavily affected. On the other hand, General sectors like Agriculture with a focus on processing, growing crops were rather not badly affected. Chemical industries in the general sector with the focus sector on the manufacture of rubber and pharmaceutical were unscathed but focus sectors of petroleum were affected as a domino effect of a hit in Automotives, construction and distributions.
Mark Harrison, Founder, and CEO of The Association of Credit for Central and Eastern Europe is an industry veteran in credit and collections space who shares his insights on customer segmentation and collection strategies in current times.
Know your Customer and your Customer’s customer
Mark went on to explain that monitoring the payment behaviours of customers is crucial now. If the payment is erratic, it can be a sign that the customer is affected and not able to pay but it may also mean that the company is delaying payments. Industry impact of the COVID on customers is also crucial. The recession which was talked about for years was a ticking time bomb which was detonated with the COVID crisis and the majority of them are going through the crisis.
Mark also added that the recession is just the start of a series of hardships that collectors might face in the coming years. With trade to and from the UK to be affected by the imminent Brexit. Most companies are in a seismic shift to adjust themself for Brexit and the corona crisis has just exacerbated and had rub salt on the collector’s cash flow wound. Recession + Brexit + Government regulations are the perfect storm for collectors as the cost of borrowing and taxes are going to increase. Collectors need To collect efficiently,
Mark stated that “Telephone is the most powerful collections tool in a collectors arsenal. With most people saying email is the best way to communicate. For customer relationship and getting the pulse of the customer, there is nothing like calling up the customer and getting a commitment from them. Sending invoices on weekends will work wonders for some customers since people are relaxed to see the email on weekends rather busy Mondays. LinkedIn with more than 675+ million members worldwide, including executives from every Fortune 500 company, LinkedIn is the world’s largest professional network and almost all your customers are bound to be there. Constantly keeping in touch with them is a great way to build rapport and expedite the collections process. Empathy Pays Back….
With Empathy, companies will stay with you as your customer for generations to come
Marks with his 40 years of experience in credit and collections space was confident that empathy is the way forward in these tense times. Many companies are genuinely affected and giving them flexibility like partial payments, credit cards, and guest links is a good way to keep them happy. If you help them during the tough times, they will remember and continue the goodwill.
Ferrero, the world’s second-biggest manufacturer of branded chocolate and confectionery products embraced Highradius automation and reduced its DSO by 20%.
Before automation, Ferrero had an inefficient credit worklist and workflow which clogged credit. With manual correspondence and dunning, collectors were having a tough time. This was made worse by the manual backup of data aggregation. All these bottlenecks affected productivity a lot.
By having data integrity of credit, collections and Invoice presentment and payment, all in an intertwined and seamless manner. Ferrero was able to maintain data integrity by breaking silos. The whole process was automated. As an adopter of Highradius solution, Ferrero increased their collector’s productivity by 40% and improved DSO (from 57 days to 25 days)
Learn how Ferrero reduced DSO
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