CREDIT WHERE DUE
Finding Middle Ground
By revising payment plans for clients in difficult circumstances, it’s possible to create win-win scenarios for everyone involved. BY J. DEE STEVENSON
“W
e’ve always done it that diplomatically while insisting that a given way.” Those words are debt be settled. Before entering into special something that most of payment agreements, use a bit of predictive us are guilty of saying, analytics with the account data you have on or thinking, at least once, if not countless hand. It may help you to identify customers times in life. However, the coronavirus has that may be (or will be) encountering liquidseverely compromised the financial health ity problems. of many advertising clients, and insolvencies I’ve found that breaking accounts into are on the rise. Because we are navigating good, fair and poor categories helps assess our way through an economy unlike any the strength of a payment plan. Granted, we’ve experienced in the span of our career, most customers requesting special payment “that way” may require some updates. terms are doing so because they are in finanTo help balance cash f low and restore economic normalcy, credit managers will need to brush up on their skills of investigation as well as negotiation. Companies that range from small mom-and-pop shops to multinational corporations are struggling to recover and gain momentum these days. At the same time, some media companies have asked their collections departments to limit their I’ve found that breaking established practices, while accounts into good, fair and others have suspended them all poor categories helps assess the together. strength of a payment plan. Given the shifting sands, it’s essential for managers to optimize accounts receivable and limit bad debt cial distress. However, others see this period loss as much as possible. In that way they of instability as an opportunity for exploitacan help sustain their company’s cash flow tion. A careful review of account analytics and working capital. can be extremely helpful in understanding a Many businesses will need creditors to client’s true circumstances. give them some breathing room as they reSometimes offering small incentives is all store their financial health. One of the best it takes to receive a payment and avoid bad ways to do this is by restructuring payments debt. The incentive might involve suspending on the outstanding balance into affordable interest and late fees on a short-term payment installments. This will make the end goal, plan when payments are made promptly. Or payment in full, much more attainable. Col- you might offer small discounts to encourage lection may involve a longer time frame, but early payments. And if a revised payment by stretching out the payments, media com- schedule doesn’t stretch out for too long a panies will have a stronger chance of collect- period, it’s likely to be just as beneficial to a ing amounts owed. And that is much more creditor as it is to their debtor. desirable than the alternative: bad debt. No matter what incentives are offered, try This process involves a careful juggling to make the payment process as simple and act: you need to work with customers frictionless as possible. Keep in mind that
8 The Financial Manager • September/October 2021
many people working in accounts payable departments may be working from home. And some clients may have had to eliminate that dedicated staff altogether. Regardless of what new payment arrangements you make, be sure and document the changes. Your records should include information about any changes in your collection methods and efforts; exceptions or revisions to existing contract terms; disputes; and payment agreements. Store them in a central repository that’s easily accessible to all necessary parties that may be working with the account. Copies of all changes also need to be sent to the customer to avoid any future disputes. A client’s acknowledgment of the changes can be of great value in the future. This written document eliminates confusion and misunderstandings while keeping the debtor on track. And it helps maintain a healthy working relationship. This record also allows you to monitor and follow up on a debtor’s progress with little trouble or effort. When credit and collection professionals truly understand the financial difficulties of customers and develop new payment plans, they have an opportunity to forge stronger relationships with them. They can also prove that they are valuable members of a company team when they adapt new collection approaches, accelerate internal collection efforts and help minimize cash f low risk. A fter all, the biggest asset on a company’s balance sheet is often accounts receivable. J. Dee Stevenson is the corporate credit and collections manager at Gray Media Group Inc. She can be reached at (850) 766-4748 or dee.stevenson@Gray.TV.
