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Finance

WHAT DO YOU GET IF YOU CROSS A GLOBAL PANDEMIC WITH A LATE PAYMENT EPIDEMIC?

Glen Morgan is co-founder and CEO of itsettled

 

How to respond to the most typical reasons for non-payment.

Covid-19 has affected businesses, and smaller businesses in particular, in a number of ways. The main challenges include a massive drop in sales revenue, weakened cash flow and reduction in orders. And these combine to threaten the future viability of the business.

UK SMEs have been in the midst of a late payment epidemic for a number of years. Covid-19 has added an extra layer of complexity onto that, and an obvious (and in many cases, valid) reason for debtors to delay or even default on overdue invoices. It’s an awful situation to be in, and efforts to help businesses to get back on their feet are ongoing and essential.

But what if you’re on the other side of the transaction, as the business that’s waiting to get paid? Here’s some practical advice for how to respond to the most typical reasons for non-payment:

 

Reason 1 – We have ceased trading or are about to enter Liquidation/Administration.

If this reason is used then you’re well within your rights to ask for proof. If this cannot or will not be provided, continue with your collections process as stated and agreed with the customer at the outset of the relationship. Only non-genuine businesses will object to providing proof.

Examples of the type of proof that would be acceptable are the name of a proposed Insolvency Practitioner or details filed at Companies House.

 

Reason 2 – We can’t pay as we don’t have any money.

Again, ask for proof. This would typically be in the form of three month’s worth of bank statements and management accounts. You might also ask if they have received any Government backed support such as CBILS or Bounce Back loans.

If they are unwilling to provide this information then it is likely to be an excuse, not a valid reason. If they have received financial support and have had cash injected into the business then you should expect payment according to agreed terms, since this is the reason it was lent to them in the first place.

 

Reason 3 – We can’t pay this all in one go. Can we pay in instalments?

You should firstly request the same proof as stated above. Providing their cash flow has been impacted, be prepared to agree a payment plan that will take the customer no longer than 3-6 months to pay the debt owed. For future transactions with that customer you need to consider proforma or advance payment to ensure the position does not worsen.

 

Reason 4 – The invoice has a query on it.

Ask them not only to provide the details of the query but also to confirm when this was originally communicated to your firm. If the invoice was raised before or during the lockdown period then they should have made an attempt to query this invoice before.

When they provide details of the query, resolve it quickly. Be prepared to reject queries for older invoices and rely on your terms and conditions, which should highlight the timeframe in which queries are accepted. If they state that they were closed for a period during lockdown and therefore have only been able to query this now, again, ask for proof.

 

Reason 5 – We can’t pay as we’re waiting for payments from customers ourselves

Again, ask for proof (do you spot the theme here?!?) such as bank statements, the number of customers that owe them money, and how much is overdue. If they’re unwilling to provide this, for whatever reason, then proceed with your collections process.

We’re in a period of unprecedented and extreme uncertainty, and it’s essential that we all support each other through it. But let’s be 100% clear. This is money owed for work that has been done, so if your customer is unable to pay, for whatever reason, then they should be open and honest with you and provide the required proof. If this isn’t provided then you need to do what’s best for your business and continue to pursue full payment of the debt owed.

It doesn’t seem as if Covid-19 is going away any time soon and the issue of late payment is one that has plagued small businesses for years. Waiting for someone else to help you tackle this issue doesn’t seem very practical, so it’s time to take control of your own cash flow.

Finance

MASTER YOUR DATA: TACKLING CUSTOMER RETENTION CHALLENGES IN FINANCIAL SERVICES

Helena Schwenk, Market Intelligence Manager at Exasol

 

Customer retention has always been crucial to financial institutions (FSIs), with the majority (80%) of senior FSI decision-makers in our recent survey affirming customer loyalty as a key priority.

However, the truly unprecedented and unforeseen events of 2020 have created a fluctuating backdrop of behavioural shifts and economic constraints that has amplified the value of robust customer relationships. In this increasingly digital-first world, where face-to-face interactions — often the best way of building trust with customers — have been further reduced by the impact of the pandemic, FSIs are left hunting for new avenues and ideas. As McKinsey testifies, nowhere is this more important than in retail banking.

As more customer interactions shift online, the market is flooded with new digital products and services from digital disrupters whose agile and diverse digital sales and marketing strategies, amplify the challenge of digital transformation for more traditional legacy FSIs.

We’ve become used to the new challenger banks disrupting and transforming the retail banking sector but interestingly the pandemic has actually seen a renewed consumer interest in traditional brands. I recently hosted a podcast on the topic of data leadership in financial services. One of the key takeaways from that discussion is the way the pandemic has heightened customer’s focus on trust and confidence, which has seemed to favour traditional banks and created customer loyalty consequences for challenger banks.

To find competitive advantage and move their digital business forward, FSIs of all types must unlock the true potential of their data. Thanks to its large number of customer touchpoints, the financial services industry generates an especially high volume of data. Handled well this data is enormously empowering. But high data intensity and the prevalence of data silos, means that poor attempts to manage and use data often create more problems than they solve.

Mastering financial services data to drive customer loyalty ultimately requires FSIs to focus on data analytics as a means to better connect their data and uncover the valuable insights needed to improve business operations, develop new products and services and, crucially, enhance their customer experience.

 

The challenges of customer loyalty

According to Bain & Co, the value of customer loyalty is exponential. Increasing customer retention by as little as 5% can boost profits by up to 95%. That said, no attempt to reinforce customer relationships is ever easy.

More than half (54%) of respondents in our survey believe customers have higher expectations around their experience when interacting with FSI organisations. This makes loyalty increasingly difficult to earn and maintain. Strict regulations such as PSD2 and GDPR also impact FSIs ability to develop and improve customer loyalty initiatives according to 41% of respondents.

These loyalty challenges if not successfully addressed have consequences: the impact on lost opportunities for customer engagement and advocacy; lost revenue generating opportunities; and higher levels of customer churn are significant. This last point is particularly pertinent considering that, according to Invesp, the cost of acquiring a customer is five times more expensive than selling to an existing one.

Therefore, one of the key areas where data and analytics can benefit customer loyalty initiatives is by giving a deeper understanding of customer lifetime value and allowing organisations to interpret and measure the loyalty of customers and predict customers’ future behaviour. Data analytics also allows FSI to actively identify clients at risk of attrition by using behavioural analytics to generate personalised customer action plans – which they can then choose to implement, tailored to the client’s specific needs.

 

Signs of maturity

Overall, there are encouraging signs of maturity in terms of FSIs adoption of data analytics compared to other industry sectors. Our survey found 97% of FSIs using predictive analytics to help them drive better customer insights and loyalty initiatives, with three fifths (62%) using it as a key part of these programs.

However, the data shows UK FSIs lagging behind their US counterparts. In the US 93% of FSI’s departments have embraced data analytics, with over half of these (51%) encompassing the entire workforce; however, in the UK only 37% of the workforce is fully embracing data analytics.

Clearly there’s much room for improvement when it comes to fostering a data-driven

culture in FSI organisations. Research by McKinsey also supports this trend. It found that despite more than half of the banks it surveyed having analytics is a strategic theme, the majority struggle to connect the high-level analytics strategy to a targeted selection and prioritisation of use cases, and to implement them in an orchestrated way. This is understandable. As FSIs step up their sophistication in data analytics, the skills and demands required mean that some struggle or are challenged to leverage them effectively.

The biggest challenge FSI organizations face when implementing data/analytics into customer loyalty initiatives is most commonly their inability to use advanced analytic methods for their desired analyses and activities and/or a lack of access to external and more detailed customer data. By adopting better analytics tools and a more progressive data strategy and culture FSIs can access data that was previously unattainable.

If 2020’s pandemic has made one thing clear, it’s that business conditions can flip very quickly, meaning the infrastructure to support fast decision-making needs to be more responsive than ever. Adapting and innovating to provide products and services that customers need during these uncertain times, using insights to de-risk and accelerate offerings helps to secure their loyalty now and beyond.

 

Revolut’s data revolution 

Revolut is a disruptor bank that’s showcasing the growth potential of a truly data-driven organisation. As one of the biggest players in the crowded fintech ecosystem it has approximately 13 million global users, meaning it has large datasets from several sources. In order to achieve incredible granular personalisation for its customers it needed to reduce the time it took to analyse all this data.

In fact, Revolut’s data volumes had increased 20-fold in the space of one year, which coincided with the need to maintain circa. 800 dashboards and 100,000 SQL queries every day across the business. Action needed to be taken to support its need for a flexible, hybrid cloud environment data analytics platform.

With an in-memory data analytics database as a central data repository, time is now saved across multiple business departments with queries and reports completed in seconds rather than hours. As a result, Revolut has experienced query rates that are 100 times faster than its previous solution – greatly improving decision making processes.

Analysing large datasets spanning several sources drives customer experiences and satisfaction. The business can now define tens of thousands of micro-segmentations in its customer base with the ability to explore payments data, debit card statements, customer demographics, mobile transfers and transaction and point of sale. It’s also seeing an increase in sales and customer retention as this has led to ‘next product to purchase’ models being built according to this unique insight.

Importantly, it’s not just data scientists that have access to the central data repository either, but everyone in the organisation. Key performance indicators (KPIs) for each team are constructed on this data too, meaning every employee has an understanding of the company’s goals, performance and progress, and can see industry trends and insights based on the data, which they can act upon.

 

Predictive power

With customers able to choose between tech giants, mobile-only banks and well-known financial institutions that have been around for well over a century, data has an incredibly important role in how all of these organisations can attract and retain customers and strengthen their loyalty through great user experiences, tailored products and innovative services.

Financial services organisations can gain competitive advantage during these challenging times with a progressive data strategy that operationalises and governs data, and empowers users to make fast, informed decisions.

The path to success is the same for challenger or legacy banks – provide services in a clear, timely and satisfying way for customers.

Underpinning this has to be the right analytics database that can support your needs, regardless of whether you store your data in the cloud, on-premise or in a hybrid environment. This is central to knowing your customers better and predicting and detecting customer trends to improve experiences. In turn, this will increase customer loyalty.

 

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Finance

DIGITAL FINANCE: UNLOCKING NEW CAPITAL IN DISRUPTED MARKETS

Krishnan Raghunathan, Head of Finance & Accounting Services at WNS, explores how a digitally transformed finance department can give enterprises the ability they need to improve cash flow and revenue through better use of data and improved analytics-driven visibility.  

Businesses everywhere are scrambling to recover lost revenues and protect cash flow. But as countries globally grapple with a dreaded second wave of the pandemic, imposing far more stringent localised lockdowns and new restrictions, it is set to be the hardest winter in living memory for many sectors.

The likelihood of winter peaks, so often the saviour of sectors such as travel and hospitality, benefitting businesses is diminishing rapidly. While many have pivoted to a greater or lesser degree, few have been able to offset the impact of falling revenues on cash flow. Even retail, riding an e-commerce boom in many regions, is finding itself in choppy waters, with 17 percent of consumers switching brands due to the economic pressures and changing priorities caused by the pandemic.

As one McKinsey article notes, “With some companies losing up to 75 percent of their revenues in a single quarter, cash isn’t just king – it’s now critical for survival”. Where then do businesses find new sources of cash to sustain their operations through the coming months?

 

Tapping Overlooked Cash Opportunities

Krishnan Raghunathan

For many, the answer could depend on whether they have digitally transformed their finance department. Why? Because many organisations are sitting on unidentified opportunities, funds that could be vital in shoring up businesses over the next few months or plugging the gap between operating costs and government bailouts. Yet those that have been slow to start their digital transformation journey are at a disadvantage;. At the same time, it is possible to identify these hidden seams in an analogue organisation, the process is time-consuming, manually intensive and, without the right digital tools, prone to human error.

Where deploying digital tools helps is by bringing speed, automation and reliable data to the fore. Connecting them with digital finance and accounting systems can give businesses clear insights into how money is being spent, where wastage is occurring, and where opportunities for optimisation exist.

It might be something as simple as automating the accuracy checking, issuing and chasing of invoices and late payments. This could reduce errors and invoice disputes and ultimately lead to faster payments. Accuracy and organisation are also important in billing – better records enable faster billing for work completed, and in turn, should deliver quicker payments.

It could also be around having the ability to review the supply chain and procurement data and identify where a supplier is subsidising a larger customer’s product line through drawn-out payment terms, or where a variety of vendors are on different terms across the business. Using that data and overall knowledge of the business to negotiate better terms that work for both supplier and customer can create new opportunities. It could even be to identify late-paying customers, determine the reason for late payments, and use that intelligence to develop products or financing solutions that continue to support those customers (and improve loyalty) without increasing the burden on the balance sheet.

 

Generating Reliable Insights for Faster Decision-making

To do any of these manually would take months, generating data slowly that would quickly go out of date. But digital finance departments have evidence they can trust to inform business decision-making. That’s because old, manual processes built around Order-to-Cash lack the flexibility and agility that businesses require in today’s markets. The fact is that even before the global pandemic crisis, the pace of digitisation across all sectors was demanding new approaches to finance and book balance.

The opportunities are significant – from cognitive credit and improved forecasting accuracy to enhanced customer analytics. All use similar tools, based on artificial intelligence and quality, trusted data. Cognitive credit can be deployed to quickly make decisions on whether to advance or restrict credit, based on individual company positions and available data. Doing so enables businesses to either capitalise on opportunities (for instance, agreeing credit for a supplier that has run out but is a supportive and integral partner) or avoid risk (in the cases where a business might be in administration).

With more accurate forecasts, businesses can better manage their currency purchases and deposits, selling currency that is not required or buying more where predictions identify an upcoming demand.

It is the same with customer analytics – with a greater understanding of customer needs, businesses can make decisions based on the right mix of the product (and how it meets demand) and supply chain suitability (such as production costs and location in relation to customers).

In many ways, the events of the past year have accelerated the process. In doing so, the problem is the pandemic has also accelerated the speed at which failure to act can lead to obsolescence. Therefore, it is vital that businesses, and more particularly their finance and accounting departments, kick start their digital transformation. This will enable them to deploy the tools and analytics that is needed to capture data, generate insights and drive fast, accurate decision-making to uncover previously untapped sources of cash and reverse revenue degradation.

 

The Importance of Digitally Enabled Finance Teams

Forward-thinking CFOs have already begun the process of digitising their departments, but for those that have been slow to start, now is the time to push forward. It is only through digital tools and analytics that finance leaders can identify both the internal and external opportunities to recover revenue and improve cash flow. Whether that’s releasing working capital, minimising revenue loss and accelerating revenue recovery, reducing total cost of ownership or enhancing customer retention – only digitally enabled finance teams will be in a position to capitalise and, ultimately, bolster business performance during what will be a trading period like no other.

 

 

About the author: Krishnan Raghunathan

Krishnan Raghunathan is the head of Finance & Accounting (F&A) practice and operations at WNS. He also leads the international delivery locations in China, Costa Rica,  Spain, Sri Lanka, Romania, The Philippines, Poland and USA.

Prior to this, Krishnan was Chief Capability Officer for WNS, in that role he headed Horizontal practices across Finance & Accounting, Customer Interaction Services and Research & Analytics, Transformation & Process Excellence, Program Management (Transitions) and Solutions development.

He has more than 27 years of experience across Finance & Accounting, Business Process Management, Sales Solutions and Capability functions including 7 years in Accounting practice.

Before joining WNS in 2013, Krishnan led several challenging roles at Genpact, supporting strategic deals and consultative selling. In addition, Krishnan was also the business leader for a number of industry verticals at Genpact, including hospitality, transportation, logistics, media and professional services

Krishnan is a Chartered Accountant, a Certified Six Sigma Green Belt and a trained Six Sigma Black Belt

 

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