As a debt collection agency or a company staring down more than a few months of uncertain accounts, people have a lot of questions concerning how business continues with everything at present.
The most common question, however, is a very general “what do I do now?” Businesses are worried about accounts going unpaid, employees furloughed or laid off, how can we seek out payment now and should we?
When it comes to commercial collections, this will be murky water. While it would be best to work directly with a collections agency to navigate at this time, we’ll cover a few general lending and collections practices that may be useful until the dust settles some time after the quarantine. In particular, when and why you’d consider suspending collection, other methods to continue talks and maintain contact with clients, and how to plan for what comes after quarantine.
It is, of course, vital to remember that every business and professional relationship exists in a unique context. How and when you approach a response to your accounts and the coronavirus impact should be tailored to your particular needs and relationship with each client.
Can I Collect
For many, this will be the biggest topic on the table. Can I collect right now with Covid-19 going around. Others want to know if they should collect right now. It’s honestly hard to say either way. You’ll really need to consider your relationship with the debtor and the circumstances surrounding both businesses.
Your first step will be consulting any state regulations that dictate how your business is operated under statewide or federal states of emergency. For example, in many states, a shelter-in-place order has mandated the closure of all businesses deemed nonessential. However, deeper still, the definition of essential versus nonessential changes from state to state. Review your own businesses status, and determine what your capacity to continue business will be accordingly. That extends to your capacity for pursuing unpaid debts.
As for the matter of whether or not you should collect right now?
It’ll be a case-by-case basis. If you’re working with a professional collections agency already, they’ll be familiar with your case and able to advise you. If you’re just now attempting to collect or considering hiring an agency, consider all the angles of your new unpaid account. Even from the most basic perspective, will your client be able to pay you right now? And if not, what will happen to your money? Does it damage your relationship with a business partner if you collect or bring up money right now, or does it show that you’re trying to support business as usual.
Start by figuring out where you and your partners and debtors stand, figure out what changes state legislation might make for your situation, and go from there.
Best Practices for Current Collections
As we all know, the longer a debt goes unanswered and unpaid, the less likely you are to recover that money. But given the circumstances, collecting money right now could cause trouble in terms of professional relationships and reputations.
That said, simply dropping debts and taking a loss isn’t acceptable either. Instead, now could be a good time to cultivate an open line of communication based around other ways to ensure that the debt is eventually paid.
One good step would be to offer a sort of temporary debt relief, in the form of smaller or delayed payments. More than anything, it’s about keeping a line of communication open and clear with anyone that you might have done business with. As both the pandemic and uncertainty in the markets impact businesses across the globe, the upheaval faced by businesses and industries of all sorts is palpable.
That’s why you’ll want to do what you can to touch base with everybody you’re currently working with as well as anyone that already owes you money. You don’t necessarily have to collect immediately, but you should know how things stand. As some states like New York put a temporary hold on collections for certain types of debt owed to the state, it’s uncertain whether other states will do the same, and whether or not that will affect collections for private and B2B debts.
While it is unlikely that private, commercial collections will be affected by direct freezes or other legislation, there’s sure to be some political or legal discussion over the matter in the months to come. Be wary and work within your community or alongside professional services to better understand the current collections landscape.
What To Plan for After Covid-19
The final step you’ll want to take is for the future. Take a look at where your business and collections process was before the pandemic, consider how successful or effective your interim measures are, and then look towards how you plan to handle the after.
While predictive planning can only realistically prepare you for so much when it comes to dealing with other businesses (whether they owe you money or not), it will at least afford you a more concrete platform to work from.
Based on how you dealt with business and collections during the pandemic, you may have a more or less urgent need to collect once the world stabilizes. But you’ll also need to consider how many businesses will have been affected. As we see major industries like the movie theatre industry and much of the restaurant industry struggling under the weight of closures and social distancing practices, it’s hard to tell where the pieces will fall.
If, for example, one or many of the businesses that you work with files for bankruptcy, how will you address the potentially lost money? Or perhaps your own business is struggling after making loans or unpaid sales to businesses that are now financially stressed to the point of debt. The uncomfortable reality is that after quarantine ends, there will be a bit of a mess to clean up across the financial sector of just about every industry.
Creating a solid plan of action, keeping in contact with business partners, and adapting to the current financial and health crisis facing people everywhere is a crucial job at the moment. If you haven’t already begun working to address these issues, you should consider setting aside some time to plan for these very issues. When it comes to commercial collections, don’t be afraid to reach out to a business like ours. While debt and accounts receivable can be a mess on a good day, it’s never a bad idea to enlist professional services.
At the end of the day, remember that the goal is to get back to good business. That includes paying bills and getting paid on time, and if that fails, you’ll have to collect on your debts.