The crisis is now as much economic as it is health-related. We are in uncharted waters, Coronavirus and the subsequent market uncertainties have resulted in various insolvency changes – and extremely challenging business conditions.
Even once the COVID -19 pandemic is under control, we will most likely suffer from an economic hangover that will be longer-lasting.
It is not all ‘Doom and gloom’, some industry sectors might have experienced a positive surge in demand, e.g. manufacturers that strengthen the local supply chain; and there are great examples of companies who have successfully pivoted to adjust their product- and service offering to newly created demands.
Yet, overall, it is difficult to see which industry sectors will be unaffected.
This leads me to the following questions:
- Are you worried about some of your customers’ financial situations?
- Have you experienced late payments or the request to change payment terms mid contract?
- Do you have an insight into your customers ‘ net worth and liquidity, their spread of risks and dependency on major clients?
Your Credit Manager might have been knocking on your door more often, to discuss the above questions. It is vital to control and gain an early insight into potential payment issues especially for your core clients.
To ensure you get paid, I recommend focussing on the following five strategies:
- Knowledge is power. A review of your debtors’ ledger can be a vital first step to allocate the appropriate credit limit or payment extension to your clients. By reviewing your customers, you will get a comprehensive understanding of which companies pose a credit risk to your business.
- Support your clients but define the limits. Talk to your customers that are slow payers to understand how they have been managing the crisis. If they are in an industry that was doing it tough prior COVID-19, you need to know if they have the capital strength to continue after the government supports payments will cease. If you agree to a payment plan, ensure that the client is following the plan demonstrating their side of the commitment.
- It is not going to get easier. If your clients are using COVID-19 just as an excuse not to pay you, I recommend to take stock of what you are owed as there is less likelihood of getting paid once the government payment support has ceased.
- Limit uncertainty through insurance.Consider transferring the risk of non-payment to your trade credit insurance cover. Experts are warning about an avalanche of insolvencies from late 2020 to mid-2021. Now is the time to reassess if trade credit insurance could be right for you to maintain revenue, protect your balance sheet from bad debt or to secure access to bank funding.
- Gadgets for your credit team.Support your credit management team with a subscription to a technical platform that makes it easy to manage credit applications, PPSR registration and that provides credit monitoring and credit alerts in a comfortable dashboard view. The speed of access to crucial information will be worth it.
At DAS Insure. We stand ready to assist with any question or queries you might have to safeguard your cash flow during COVID-19 and in the aftermath, which will expose the economic impact.
I also gladly share our experience with clients from your industry and provide references, case studies to better demonstrate how we might be able to support your credit management team.
Stay Safe, Stay Positive,
Director of DAS Insure Pty Ltd
Risk Management Solutions for Trade Credit, Surety and Cyber.
Important Note: Financial decisions require careful consideration of your circumstances and risks – among other things. Any non-personalised notes should be considered general information. General information is not tailored to your individual needs. You should seek the advice of a financial advisor, your accountant or talk to a credit insurance broker for your individual needs.