Canadian businesses are facing unprecedented economic challenges as a result of COVID-19 operating restrictions. As government economic stimulus programs continue to shore-up the economy, the attention is now focused on the work of rebuilding and adapting to the “New Normal." For Canadian Crown corporations and other government agencies with missions involving revenue collections, it’s time to employ data-driven methods to bolster such initiatives, and to do it with compassion.
The traditional approach of prioritising collections by “oldest and biggest” simply won’t work in such trying times. Your methods of working with businesses to collect payment need to adapt. Now is the time to provide support, which includes taking a more compassionate approach to the collections process. And now, more than any time before, decision-making needs a foundation of business intelligence from data sources other than those internal to your organization or provided by a business establishment directly.
External data sources are the key to support a pandemic-sensitive reprioritisation of collections activities, including:
- Determine the current operational status of business establishments
- Identify firms and locations impacted directly by the pandemic
- Develop profiles of firms experiencing significant financial distress prior to the pandemic
- Identify firms based on their ability to recover from the pandemic
- Update profitability and financial viability models of target businesses to adapt collection approaches as needed
Consider these four best practices you can use to carry out compassionate collections in a highly targeted way during the pandemic.
Segment your portfolio based on a company’s viability to uncover the new risk landscape
Reprioritising collections based on your new risk landscape can yield insight on which accounts should be contacted and provided payment options; and, which businesses remain healthy enough to meet their financial obligations. Portfolio management is not only valuable for businesses with open, active accounts receivable. You should consider the entire agency master list—which should include all active accounts—to whom you’ve granted a loan or guarantee, or who have a tax liability or a license obligation.
Choose a softer touch with past due accounts
Once you can better determine which businesses are now at a higher risk of failure, you’ll be better prepared to practice compassionate collections. If a business seeks to renegotiate loan or debt terms, you’ll know if you can be more flexible. There are many businesses that have historically been “low-risk” that are now experiencing hardship and financial stress—if they become high-risk because of the pandemic, you may want to continue to keep their accounts in good standing based on data Dun & Bradstreet can provide.
Use emails and phone calls to regularly keep in touch with the companies you work with. These offer opportunities to collect information and hold creative discussions about bouncing back from the pandemic.
Create new collections campaigns for individual segments
Portfolio segmentation based on financial risk can help you create new collections campaigns in response to COVID-19. You can determine which businesses are still operating healthy establishments, but are missing your collections goals. Triangulate that segment to revisit the overall business relationship to see if you can convince companies to move your agency to a more preferred or critical vendor status, potentially getting payments in more quickly. Businesses are focused on working capital right now, even healthy ones, and creativity to ensure your organization is viewed as key or critical can accelerate payment and reduce time to achieve revenue collection.
Monitor today’s dynamic business environment over time
The economic recovery will emerge, but it is likely to involve several years of effort by the public and private sectors. It is also likely to involve developments daily, which underscores the importance of updating your processes for monitoring changes among your business account portfolio. Invest the time now to prepare for increased numbers of bankruptcy filings; business failures where a firm fails to meet its credit obligations and ceases operations without bankruptcy protection; changes in operational status; merger and acquisition activity; and consolidation of existing real estate or addition of new locations.
Beyond the concern you have for the businesses you work with, certain strategies and campaigns can also make your employees less stressed during these difficult times. Collections can be considered a thankless job, so it’s important right now to guide your team properly. You don’t want collectors arbitrarily creating their own workflow—they could be contacting the wrong companies or using aggressive tactics based on past experience that aren’t appropriate right now.
Given a more data-driven and targeted approach, government leaders have an opportunity to free up staff time, which might be best used to catch up on administrative work, reconciling disputes, addressing adjustments, and providing updates and reports. Collectors have a tough job, so show compassion to your team. Our ability to find positive experiences during trying times is what motivates and encourages employees.
Canada will overcome the pandemic, and our ability to succeed in a post-COVID world will depend on how we work collectively to interact and conduct business today.
* The information provided in this article is a suggestion only and based on best practices. Dun & Bradstreet is not liable for the outcome or results of specific programs or tactics. Please contact an attorney or finance professional if you are in need of legal or financial advice.