Money Matters

Debt management in the wake of COVID-19

Why respect and understanding are a two-way street.

The medium to long-term economic effects of COVID-19 are still unknown, but one thing’s for sure: the cashflow of most businesses has been impacted to some degree. Being a debtor or a creditor in these uncertain times can be extremely stressful, which is why it’s important to keep communication lines open with honest dialogue.

Whether you owe the money or you’re the person who is owed, that first phone call is probably the hardest. It may feel very uncomfortable to initiate contact, but it’s essential that you both establish a basis from which to work.

If you’re owed money, you need to find out if the debt is disputed. If it is, you may have to seek advice from your accountant and/ or lawyer.

If the debt is not in doubt, what would be a reasonable timeframe for it to be paid? Would full payment within seven days be feasible, or would a series of instalments be more appropriate? This will depend on various factors, including perhaps your knowledge of the debtor and how long the debt has been outstanding. If the debt can’t be paid immediately, remember that some is better than none. Ask: “What can you afford?” and be willing to work with your debtor, based on the evidence they have to support their proposal.

Unfortunately, every so often you may encounter a “professional debtor”. They repeatedly owe money with little or no intention of repayment. In these cases – which, I should stress, are the minority – it’s even more critical to stay engaged. Once somebody disappears off your radar it can be very challenging to recover the debt.

If dealing with debtors is feeling too overwhelming, you may decide you need help from a debt collection agency. Certainly, this does give the impression that you’re serious about recovering the monies, and just mentioning that you’re passing the case to an agency could prompt a swift settlement.

When you’re choosing an agency, make sure you select one that will protect your brand

and reflect its values. Phone calls and e-mails will go to and fro, and, if these are aggressive or heavy-handed, they may get you a quick “positive” result, but the backlash – via social media or word of mouth – could do lasting damage to your reputation. Ask the agency if they record their phone calls, and for the type of questions they’ll be asking the debtor. These should be respectful, offering room for firm but fair payment negotiation.

Above all, directly or indirectly, keep talking. Remember that we’re in this together, and collaboration will help us all come out stronger.

Zelda Nichols is the group sales manager at ICMS Credit Systems Ltd, based in William Pickering Drive.

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