Balancing efficient debt collection and strong customer relationships
In August, De Tijd reviewed an alarming increase of unpaid invoices in Belgium. Febeg (the federation for energy suppliers) warns that due to the pandemic a growing number of people and companies cannot pay their energy bills on time. Other instances also report on financial consequences of the pandemic: De Morgen writes that banks fear to experience such increase too.
The importance of debt collection
Companies that deal with growing numbers of defaulting customers want to collect these unpaid invoices as soon as possible since they negatively impact liquidity numbers. This is reflected in the Intrum Payment Report of 2020. It shows defaults have a negative impact on liquidity during the coronacrisis. While 35% of companies noted that defaults endangered their liquidity before the pandemic, that number has increased to over half of the companies.
To strengthen their financial position companies want to recover revenues quicker through collecting unpaid invoices. However, it’s important to oversee this isn’t done at the expense of customer relationships. Aggressive invoicing can damage customer relationships and even end them. To avoid this from happening, we explain how companies can combine efficient debt collection with strong customer relationships. The answer? Ethical debt collection.
Companies in multiple industires, ranging from banks and insurance to utility companies and hospitals, are balancing cash flow results and commercial relationships. They have to keep their heads afloat during these insecure times without pushing their customers head under. Just like many others, their customers are financial victims of the pandemic. Companies are therefore in a position of responsibility.
The nature of the situation brings forth societal responsibility. Companies that claim to highly regard CSR (Corporate Social Responsibility), now carry that responisbility more than ever. With the pandemic hitting their customers, it’s their chance to put the CSR-policy into practice by collecting unpaid invoices ethically.
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This means companies must take up a transparent and humane approach. Procedures should be tailored to the (financial) position of customers. These 6 tips allow companies to optimally collect debts during the pandemic with respect for their customers.
Next to ethical responsibility, the financial aspect plays an important role in ensuring ethical debt collection. If companies use aggressive collection practices they risk losing customers. Such losses are often more financially damaging to companies than defaulting customers: it’s more costly to acquire a new customer than to retain an existing one. According to some sources, it can be up to 5 times as expensive.
We therefore recommend to consider the value your customers will bring in the future. It can be more favorable to offer them some room to breathe during the pandemic and to go over payment options together, than to undertake legal actions immediately. This will lead to loyal customers, which doesn’t only increase the customer lifetime value but also the net promotor score. Additionally, companies that focus on settling amicable agreements quickly have a higher chance of completely collecting unpaid invoices.
Ethical debt collection
To sum up, it’s possible to collect debts efficiently and effectively at the same time. Even more so, companies benefit financially from choosing a humane approach.
- Handling according to their CSR-policy strengthens companies’ credibility and image.
- It’s financially more appealing to collect unpaid invoices ethically, since companies can achieve better customer retention at a lower cost.
- Amicable agreements will result in a better cash flow than dragging defaulting customers into legal settlements right away.
Unite debt collection and customer relationships with Virteo
Thanks to Virteo, companies collect unpaid invoices ethically while also collecting them quicker. How do we do this? Our platform centralizes the complete amicable and legal debt collection procedures that are requested by companies to debt collectors. We unite both parties on our platform. The debt collector manages all files completely in Virteo, which is why companies can adjust procedures at any time and make accurate cash flow predictions.
The Virteo SaaS platfrom is a gamechanger in the opaque debt collection industry, since it brings full transparency to the debt collection process and encourages a human approach to defaulting customers.