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Wilson Cole's Podcast From The Road


Mar 27, 2020

In today’s Monday Morning memo Wilson and Samantha tackle a pressing topic caused by the ongoing pandemic. This is what you need to know about credit and collections during a downturn followed by what you need to do during the recovery of the economy.

What You Need To Know About Credit and Collections In a Downturn

Downturns happen every once in a while due to certain events. In this case, it’s a global pandemic that is forcing many to shut their doors. It’s weakening the economy and many won’t survive after this is all over. This means that many staffing and recruiting companies will begin to face problems once their clients stop paying their fees. Wilson and Samantha share what they know about credit and collections in a downturn while also exploring what you can do during the recovery period.

Get That Contract Signed

We cannot stress this enough. Get all of your contracts signed. It may not be impossible to collect if you don’t have a contract signed, however it makes it infinitely more difficult to do so. Signatures take away all the risk and ambiguity in business as it makes sure everyone signs off on the same things. This makes sure you’re in a strong position and ready to counter any arguments that may come from your clients.

Categorize Your Clients

You’re going to have clients of varying sizes and you should make sure to categorize them. Large publicly traded and regional companies are the ones who are more likely to pay you during this time. On the other hand, you need to keep an eye on smaller businesses.

Small businesses in America have five hundred or fewer employees at any given time. They are also the least likely of the three categories to follow through with a payment. This is because their circumstances can change as their credit lines dry up. Make sure that you set credit lines based off of credit worthiness instead of your client’s needs. This helps you be more defensive and avoid non-paying client problems.

Set Up Systems that Speed Up Cash Flow

One of the things Wilson recommends to speed up the cash flow is to make sure that you avoid using the term “net ten days or thirty days” as well as “due upon receipt”. Instead, put in a specific date to make sure your clients know when they should pay their dues. Another great way to improve your cash flow is to use friendly reminders.

Recovery Tips for The First Two Months

A great way to spend the downtime during the recession is to make sure you audit all of your paperwork. Audit your existing agreements, forms, and pull credit on all the existing clients to get the most out of your first month.

In the second month, you should be getting everything in order, and spend time on projects you have been putting off. Make sure that you’ve set up credit lines, and have the signed agreements ready to go. Set up a system of ongoing client checks. The key is to not be abusive but you want to be aggressive on these things.

Recovery Tips for The Third and Fourth Months

The next three and four months are crucial for you to get ahead during the recovery period. One of the ways to get paid during this period is to become a secured creditor and by using personal guarantees. Becoming a secured creditor and using a UCC puts you in the best position to get paid. It’s similar to a mortgage and the first person or company to file for it is usually in the best position to receive payments from the company in question.

Another solution is to set up systems that speed up your cash flow and make it efficient and automatic. Set it up on autopilot so to speak. The key here is speed and the faster you can get things done, the higher your chances that you’ll come out on top. However, you should also watch each step you take and avoid being sloppy about your paperwork.

Quotes

-With the background that we have right now getting the signature is in my opinion one of utmost importance. It eliminates any confusion and put you in a much stronger position

-you want to set credit lines based on the credit worthiness of the client versus their needs. You need to have a system in place.

-I can't stress enough if they've been paying their bills poorly for the last 10 to 12 months those are the companies that are not going to survive

-Don't go rush full speed ahead to try to print, try to regain the time you lost and get sloppy about paperwork. That's gonna be key

-We’re in uncharted territories you need to make sure that there's no ambiguity to your

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