During normal business operations, it can be a risk to extend credit to clients. As a business owner, you know this risk is part of doing business. Customers expect it, and you risk losing business without it. During a crisis like COVID-19, extending credit or payment plans becomes even more risky. When customers are at risk of losing their jobs or dealing with reduced hours and pay due to COVID-19, they are more likely to default on their payments. While we always recommend referring unpaid debt to us at Southwest Recovery, the best way to deal with unpaid invoices is not to accumulate any to begin with. Here are some tips to keep your cash flowing in a crisis.
Get Paid Up Front
The best way to avoid outstanding invoices is to get paid in full up front.
In normal circumstances, many businesses use payment plans and credit options to entice their customers and encourage them to buy. It may be wise to rethink that strategy during a crisis like a pandemic or recession.
If it’s possible to suspend payment plans and internal credit for a while, do so. However, if you would lose significant business from doing this, try a more subtle approach. Offer incentives to customers who pay in full. Some ideas for this include discounts, free add-on’s, or bonuses like free delivery or installation. Many customers will be encouraged to break open that piggy bank and pay in full if there is something in it for them.
Tighten Up Your Terms
If fully avoiding extending credit isn’t an option for you, consider reviewing and possibly changing some of your terms. Here are some ideas for changes you could make to your credit or payment plan terms:
- Require a higher credit score for approval
- Require longer tenure at the applicant’s job or higher income
- Require a larger down payment
- Lessen the amount of time they have to pay the loan off
- Offer incentives for early payoffs
Outsource Your Credit Options
Even outside crisis situations, managing customer credit internally can be a pain. It adds a lot of paperwork and administrative infrastructure to your operation, which adds to your workload as an owner or manager. During a crisis, it becomes an even draw on time and resources. There are many more overdue letters to send and phone calls to make. One possible solution to this is to outsource your credit provider.
There are many options available to businesses to outsource their payment plans and credit offerings. For medical providers, CareCredit is a great, reputable company. There are also companies like Affirm, Afterpay, and even PayPal that provide financing options for your customers. Using a service like this can significantly reduce your overhead when it comes to dealing with overhead from extending payment terms.
When You Do Need Debt Collection, Call Southwest Recovery
No matter how many steps you take to reduce your receivables, you’ll always have some customers with outstanding invoices. When that happens, call Southwest Recovery Services. Our trained and experienced collectors are standing by to start recovering your debts. We can help you collect the money you are owed so you can get back to business. Get in touch today to get started!