Aug 2020 | Credit Decisions | Credit risk

What a time to be in commercial credit control or collections

These are incredibly challenging times to which we must adapt in order to successfully grant credit, collect money owed and ultimately survive.  No one in this generation of credit control or collection teams has ever lived through a period where many of their customers had to press the pause button on their business for a lock down and survive through it, many with government support such as the 9.6million jobs under the furlough scheme or the one million plus bounce back government loans.

During lockdown, many businesses were able to survive on little or no revenue by cutting their costs to a minimum.  However, we are now in the transition period out of lockdown where the costs may have returned quicker than the revenue putting great stress on businesses.  Unfortunately, there will be more challenging times yet for businesses when the furlough scheme ends, payment holidays finish and loans need repaying.

The question for credit professionals is, should we approach this situation in a fundamentally different way? 

The basics are as important as ever; relationships with your customers, prioritising valuable collections time to chase the most appropriate debt and gaining as much insight on existing and new customers as possible.  However, all these aspects need to take on a slight nuance:

Relationships with customers – can you tell the difference between those that can’t pay with those who won’t pay?  A long term customer with a historic record of good payment might just need a little forbearance so they are not pushed into financial hardship and can continue to be a loyal customer, but you will only know this by understanding your portfolio and the circumstances of key clients.

Prioritising collection – With limited resources you will want to be spending time on debt that might not otherwise be collected, not on the debt that will be collected anyway, even if it is now a few days later than usual. But how do you know which debt this is?

Insight and information – you need to use as much information as possible from many different sources.  Traditionally, company accounts filed at Companies House have often been the starting point for insight on a company, but this is historic information which, under the Companies House Covid filing extensions, can now be filed up to a year after the period end and a lot has happened recently!  However, this will still give some indication to the strength of the business prior to the crisis, which will give some insight as to how well it might survive, but it won’t show any new loans or how quick it is burning through cash reserves.

Experian’s Payment Performance data sharing scheme

As part of our work assisting our clients through this period, Experian is highly recommending that they share payment performance data on how well their customers are paying them.  This is up to date information that shows real payment behaviour in the current period.  Experian match and aggregate this data with millions of other payment experiences to build up a picture of how well businesses pay their trade credit debts.  This has benefits for all parties:

Data Sharers benefit through the Days Beyond Terms analysis Experian provides free of charge.  This shows how well data sharers’ customers are paying other suppliers and can help to give greater insight on the can’t/won’t pay issue.  Experian also provide Experian branded messages for use on invoices and statements to help with debt management.  Those data sharers that are clients will also qualify for access to more predictive scores using closed user group finance data.

UK businesses seeking trade credit benefit because the presence of positive Payment Performance data on their business often improves the credit scores and limits, which gives greater confidence to trade creditors to grant credit.  Of course, it also highlights poor payers or, where there is a worsening trend of payment, highlights those businesses that might be in distress. This helps in assessing credit risk when granting trade credit and can be hugely valuable, especially in times of economic crisis.

If you would like to talk to us about our free of charge Payment Performance programme please contact and one of our highly experienced Data Partnership Managers will be able to advise you further.