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

“We’ve always done it that way.” Those words are something that most of us are guilty of saying, or thinking, at least once, if not countless times in life. However, the coronavirus has severely compromised the financial health of many advertising clients, and insolvencies are on the rise. Because we are navigating our way through an economy unlike any we’ve experienced in the span of our career, “that way” may require some updates.

To help balance cash flow 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 established practices, while others have suspended them all together.

Given the shifting sands, it’s essential for managers to optimize accounts receivable and limit bad debt loss as much as possible. In that way they can help sustain their company’s cash flow and working capital.

Many businesses will need creditors to give them some breathing room as they restore their financial health. One of the best ways to do this is by restructuring payments on the outstanding balance into affordable installments. This will make the end goal, payment in full, much more attainable. Collection may involve a longer time frame, but by stretching out the payments, media companies will have a stronger chance of collecting amounts owed. And that is much more desirable than the alternative: bad debt.

This process involves a careful juggling act: you need to work with customers diplomatically while insisting that a given debt be settled. Before entering into special payment agreements, use a bit of predictive analytics with the account data you have on hand. It may help you to identify customers that may be (or will be) encountering liquidity problems.

I’ve found that breaking accounts into good, fair and poor categories helps assess the strength of a payment plan. Granted, most customers requesting special payment terms are doing so because they are in financial distress. However, others see this period of instability as an opportunity for exploitation. A careful review of account analytics can be extremely helpful in understanding a client’s true circumstances.

Sometimes offering small incentives is all it takes to receive a payment and avoid bad debt. The incentive might involve suspending interest and late fees on a short-term payment plan when payments are made promptly. Or you might offer small discounts to encourage early payments. And if a revised payment schedule doesn’t stretch out for too long a period, it’s likely to be just as beneficial to a creditor as it is to their debtor.

No matter what incentives are offered, try to make the payment process as simple and frictionless as possible. Keep in mind that

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 workI’ve found that breaking accounts into good, fair and poor categories helps assess the strength of a payment plan. ing 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 flow risk. After 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.