Normally, March and April are kind of quiet collection months. If a lot of snow has fallen up north and the weather has been nice down south, most businesses, especially seasonal ones, have managed to do fairly well.
Unfortunately, this year we’ve been hit with a double whammy of natural disasters. Not only has the pandemic turned the economy upside down, but the arctic polar vortex brought very cold weather, resulting in outages, lack of water, and flooding in the lower mid-west and south. This no doubt has greatly compounded the existing financial pain. And on top of it all, the tax bill is coming. So, what are we collectors supposed to do when customers tell you they’ve been badly impacted by all these catastrophes?
Show Empathy – It costs you nothing and will probably pay dividends in the long term. If some companies are really struggling due to the effects of the pandemic and the recent natural disasters, basically staying afloat by a hair, then all you can really do is to empathize with them. At least that will allow you to keep the lines of communication open and the relationship above water. I’m not saying that you should give them a pass, but first things first, and that’s to genuinely convey a feeling of understanding. When the other party feels you are not there to fight them or make them feel any worse than they already do, at least you’ll have a chance to see how “the two you” could possibly move forward on the payment issue.
Be Creative – I may have mentioned this in the past but if your debtor’s customers are not paying them, this may legitimately be the main reason why they cannot pay you. In this scenario, is it plausible to see how you and your debtor can work together to collect from the end commercial purchaser of your product? Being able to communicate directly with the end purchaser might just uncover collection opportunities that were not being communicated to you. In fact, it may be that the final buyer is indeed paying your debtor, but your debtor is not remitting to you. In that case, it might be better for your company to sell directly to the end purchaser and apply a certain percentage of the sale to your debtor’s outstanding balance. The only way any option is workable is if you and your debtor are able to communicate openly and honestly to discuss the resolution of the outstanding balance.
Consider taking back Inventory – If your product can be taken back and resold with little to no modification, perhaps this is a good option for you. I’ve heard of some companies taking back their inventory and reselling it at a small discount to current paying customers. If it cannot be resold, perhaps it can be scrapped. Sometimes the salvage value in scrap, especially where precious metals were involved in the manufacturing, could yield a 40-50% of the original cost value.
Sometimes something is better than nothing – I’ve heard of some collectors taking short term payments of even $100 per month against a $10K balance. Now of course, no one should take this kind of payment for more than a few months but if your debtor is really hanging on by their fingernails and they’re still willing to pay you something, hopefully this will only be a short term arrangement until they manage to recover.
Hector the Collector is a credit and collection advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (firstname.lastname@example.org) are most welcome!
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