Businesses have faced over a year of uncertainty, and whilst Covid-19 restrictions are set to be lifted next week, the ramifications of the Covid-19 pandemic will continue for business owners for a long time to come. Late payments have been a persistent problem for many businesses over the years, but Covid-19 saw late payments rocket to record highs causing significant problems for many businesses, particularly SME’s.
A study by Critical Research revealed that 50% of SME’s have been paid late throughout the pandemic and roughly £21,000 has been written off since the start of the first lockdown in March 2020.
Despite the disruption, there are things businesses can learn from the pandemic and there are opportunities going forward to review credit control processes and put new strategies in place.
What can we learn from the Covid-19 pandemic?
Forecasting is essential
If we can learn anything from 2020 it’s that uncertainty can be just around the corner and you never know what might cripple your business next week whether it be a flood, fire, or a global pandemic. Therefore, forecasting is essential so you can predict your busier periods, quieter periods and be proactive about your cashflow.
Give yourself insight
Do you know exactly how much you’re owed, by who and when it’s due? The first step in effective credit control is equipping yourself with insight so that no late payments get missed, and you can monitor your exact levels of customer debt in real time. A robust Credit Management Solution will do exactly this and could be considered a must-have investment in a post-Covid world.
Following the pandemic, more businesses will be selective about the clients they take on as it is safer to have fewer customers that provide quick payments than several customers who leave you with large amounts of customer debt. Although we appreciate not all businesses will have the luxury of being selective with clients.
Be patient with your business and don’t put too much pressure on yourself to expand because 2021 will largely focus on recovery for many businesses. Stick to routine, regular work and leave big decision making and risk taking for 2022 and beyond.
Review your payment terms
Up until now your business may have been flexible with regards to payments to maintain good client relationships, however post Covid-19 you might not have the option to play nice. The pandemic has highlighted the importance of being stricter with your customer payments and not letting late payments mount up.
The restrictions may be lifting but the implications for businesses will last for much longer and there are lessons to be learnt from the Covid-19 pandemic with regards to credit management. Going forward, forecasting has never been more important for businesses, along with robust credit management software to give you critical insight into customer debt. Now is also the time to review payment terms and if possible, to be selective with future clients going forward.