Pandemics and ports
Restrictions during the pandemic caused ships in numerous ports to be held up and unable to dock. Britain’s exit from the EU added further complications. Across multiple sectors, shortages of raw materials for production and furloughed staff have caused a backlog in both production and supply. As restrictions ease, economies around the world are starting to pick up, and with them comes a rise in demand.
In a world that in the last decade had more supply globally than demand, the turnaround has been challenging for many businesses. The problems caused by shutdowns, shipping and travel restrictions are now having a profound impact on finance teams, many of which face the best of the worst problems – high order volumes, late deliveries and late payment.
Supply and demand imbalances
Having the raw materials for production has caused supply problems in several industries. Still, even where finished goods or services are the main stock in trade, there has been a seismic imbalance between levels of supply and levels of demand.
The knock-on effect is that buyers want products but often struggle with their own credit collections and cash flow issues, which get passed on up the chain. The major international businesses we serve have all faced challenges with buyers unable to pay on time, despite having a healthy order book. There is not a lack of money; there is a lack of money when and where it is needed or indeed due.
Cashflow supply chain
The shortfall in supply has caused some businesses to fail to meet minimum supply requirements set out in framework contracts or master agreements. Charging a minimum amount on schedule for orders you could not fulfil is a recipe for disaster: or at least for invoice disputes.
Every business in a supply chain is impacted by a breakdown in the payment cycle further down the chain. Cash flow is squeezed even where the supply of materials is not an issue. Hence, there is a growing demand for more scalable, organised and efficient ways of solving the immediate problem of cash collections. Here are two ways we are helping businesses get through the backlog of unpaid invoices caused by the pandemic.
Collections excellence
Most of our clients use the eBilling module to automate the creation, delivery and tracking of invoices. Ours is a modular system, and not all of our clients use the Collections or Disputes modules which respectively help chase late payment and manage escalated queries or complaints (invoice disputes) through to resolution.
In all cases, the secondary benefits of the systems is an increase in data for reporting and a greater ability to analyse information around AR to understand better what is changing on a weekly basis. Collections is the module that helps businesses systematise the process of sending reminders, dunning letters and statements, and scheduling follow up, or collections calls where these are required. In some industries, rising levels of late payment have been a hot issue, but where clients have the Collections module, the additional caseload has not been difficult to handle.
Upscaling to meet velocity and volume requirements is easy when there is a system that tracks, monitors, prompts and reports for you, leaving the credit controllers to do the personal work of making calls and analysing the relevant data to figure out new approaches to the credit-control problem. This luxury is not available to those whose collections processes are outsourced or are handled using a bewildering array of spreadsheets and systems.
The Collections module of Corrivo helps businesses meet peaks and troughs in levels of overdue invoices and forensically examine the data to identify agile, new strategies to resolve problems.
Buying time
The second way we are helping businesses overcome issues of cashflow shortage in their supply chains that limit customers’ ability to pay on time is through financing options. The construction industry is currently undergoing a boom, not just with new housing but with RMI (repairs, maintenance and improvements).
There is great demand for products, but building firms often do not get paid until projects are completed, so they are finding it difficult to pay on time. Our solution is to offer our clients a confidential, low cost and highly convenient solution to pass on to their customers. One option is for suppliers to offer selected customers the option to pay a small premium (far less than credit cards, loans or other lending solutions) to have an additional 30-60 days to pay.
The supplier gets paid on day 30, and the buyer gets the extra time. There is no complex sign up or vetting procedure, no uploading of invoices or credit scoring. The whole thing is seamless and easy.
The second option, often reserved for the elite customers whose loyalty is financially significant, is to obtain early payment. Unlike most invoice financing solutions, there are no credit scoring, vetting procedures or percentage payments. The entire invoice value is funded on day 30, and the customer has 60 or 90 days to pay.
Our client gets predictable cash flow, and their customers get additional time. Our client pays a small fee, and for that price, they win customers’ loyalty, keep their turnover healthy and avoid losing out to the competition.
Maintaining turnover
Customers will shop elsewhere unless you are the one and only source of what they need. In today’s economy, it is not the products but the entire proposition that keeps customers loyal. Being able to have credit control staff who are relaxed, pleasant and friendly when chasing payment and offering low cost and convenient solutions to short term cash flow issues are two invaluable assets that our clients get to appreciate, thanks to Corrivo.
To find out more about our Collections, Disputes or Invoice Finance solutions, contact me by email: davidh@datainterconnect.co.uk.
