Covid-19 crisis and credit management: act now!

What impact on credit management and accounts receivables management will have the economic crisis caused by the Covid-19?

Crisis Covid-19 In addition to the health and human impact, the effects of the global health crisis will be obviously major for the economy.

It will probably be more significant than those of the 2008 crisis which "was only a financial crisis" whose effects on the economy had certainly been significant but which had not caused a shutdown of whole sections of economical activity, as it is the case today.

Some companies will find it difficult to adapt and continue to fund their activity.

The consequences of the Coronavirus are likely to be long-lasting and force some to undergo radical changes in their organization, even their economic model.

If it seems impossible to predict the future, some principles seem to be able to emerge.

Unequal effects depending on the business sector

Many sectors have been hit hard by the crisis and the confinement imposed on populations.

First, those that are based precisely on the movement of individuals: tourism, automobile, air transport, physical businesses (retailers) of non-food or pharmaceutical goods, sport and well-being, etc.

The sudden cessation of all or almost all of their activity for a significant period of time will create multiple problems for these companies (human resources management, financing, etc.) and particularly those which do not have the possibility of quickly orienting their activity towards online sales or other alternative.
It is the adaptability of their organization and the solidity of their financial structure that will determine their resilience in front of the crisis.
Certainly, governments measures to support the economy are very important (thousand of billions in the USA, etc.) and will help a number of businesses in difficulty.

However, we must not delude ourselves, despite its commitment and its desire to support companies "whatever the cost", the states have limited means and cannot replace a collapsing orders book, a turnover that stops net.
Public aid will have a buffering effect but it will not be sustainable.
Some companies will not recover, especially the most fragile and those with limited adaptability.
Crisis Covid-19

The duration of the crisis will also be decisive.

Furthermore, will this crisis end, or will it bring about deep and lasting changes? The future will tell. If the second option happens, the capacity for adaptation and transformation of companies will be essential to define their sustainability and their development.

Other business sectors are less impacted and some could even benefit from the situation (digital, ...). However, the complexities and multiple and unpredictable difficulties created by this situation also have consequences for the most privileged.
In this unprecedented slump and confusion, it is essential that companies define credit management and debt collection management as absolute priorities.
Indeed, ...

... treasury is the elixir of long life for our companies

Only cash will allow them to overcome a difficult period and adapt to the new conditions that will be imposed by the market.

To prepare, strengthen and preserve your business' treasury, count above all on yourself and your ability to accelerate cash collections. Do not lose a minute! Take action!
  • Contact your customers to obtain promises to pay, and when this is not possible, to take into account their difficulties.
  • Favor dialogue and engaging agreements. If necessary, validate with them a payment plan. Show that you are present, demanding while listening to the legitimate problems they may encounter.
  • Each customer, whatever its size, each invoice, whatever its amount must be actively managed. Shortened collection scenarios, specific actions, alerts, reports, etc.
  • Anticipate the risk of insolvency and prioritize your actions on the most fragile clients.
More time passes, more the financial consequences will be felt in companies.
Be present with your customers, and you will be paid in priority. Be lax and your open invoices will be forgotten, voluntarily or not.
  • The urgency is to be in the right, precise and massive actions on your whole portfolio of customers.
  • For the highest stakes, we recommend that you bet on human relations and create allies among your customers.
  • Read our tutorial on the keys of cash collection, even more true nowadays.
As a customer account manager, collection manager, credit manager, accountant, financial director, you are on the front line to ensure the sustainability of your business.

Act without delay and apply the principles of credit management!
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S.V.I.L. - 24/03/2020
Efforts to overcome this crisis are common, only monocentricity and joint action can minimize damage.
It is important to take care of the survival of key companies, not only the core functions of society, because if the prospect of the future disappears, so does hope and direction.

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