Have you downloaded the EHNA Non-Payment Checklist? It’s is a helpful guide for ensuring damage is minimized and the chances of resolution are maximized when it comes to a big customer who doesn’t pay. But wouldn’t it be better to avoid a non-payment situation in the first place? Below is a matrix for overhauling your organization’s AR risk position based on three tiers of strategy: Foundational, Defensive, and Offensive. Want a hint? Focus on the offensive. Keep reading.
|Systems & Contracts||Processes & Documentation||Insurance & Intelligence|
Get back to basics. Establish a predictable standard for your core business practices; use a repeatable process to make sure your invoices are sent out regularly and quickly; call customers before invoice due dates and send late notices immediately. Document it and include it in the onboarding of new back-office staff.
Give your policies a make-over. Institute new policies to protect yourself (e.g., down payments, retainers, milestone payments) and set a calendar reminder now to revisit your process again a year from now.
Secure the signatures. Establish a digital filing system for signed agreements to insulate your company from some (or all) receivables risk. Ensure that all contract documents are easily accessible and set your system up to receive e-signature documents as well as scans. Don’t let things live only in email.
Create a sufficient paper trail. Work with an attorney to draft documentation that will support your actions—contracts, payment timelines, your company’s standard terms and their definitions; make sure everyone’s on the same legal page and agree on a uniform naming convention for documentation.
Become an over-sharer. Communicate your credit management process to other departments within your company; set clear limits on required actions and make people accountable. Make sure you are including customer-facing account staff as well.
Keep improving. Set ambitious goals and actions; periodically measure your performance; apply changes whenever and wherever necessary. Includes your bizdev people in your post mortems on bankruptcy and non-payment situations so they can be learning what to look for when it comes to customer risk at the prospecting stage.
Protect your assets. Consider purchasing trade credit insurance to not only protect your assets from loss, but to also mitigate future risk and free up your AR and loss reserve funds for investing in future growth.
Don’t go it alone. Partner with experts to get data and insights to help you pick the right customers to work with; monitor their financial health throughout the year; and get reimbursed in the event a covered customer fails to pay.
Pursue forward-facing research. Check and monitor the creditworthiness of your prospective and existing customers; implement a defined system for monitoring changes in financial wealth—particularly signs of fiscal distress. Have all your internal stakeholders take advantage of this intelligence.
“Even if you’re on the right track, you’ll get run over if you just sit there.” -Will Rogers
OFFENSIVE PLAYS ARE WHERE WINNERS ARE MADE
See those three items above in the Offensive section? This is where Euler Hermes comes in. With Trade Credit Insurance you get both sides of the coin when it comes to re-positioning your risk position towards AR. You get protection against non-payment to ensure that you’re stable no matter what happens with your clients. That’s insurance. On the other side of the coin you get research, data, and insights so that you can make even smarter decisions about which clients you extend credit to, which you don’t, and how to know the difference. That’s intelligence. That’s Euler Hermes
Business is about reinvention. It’s about evolution. It’s about outsmarting the competition and making the right move at the right time.