How to help your customers manage credit risk in 2022
The year 2022 started with a lot of concern for high inflation rates across the continent. To make matters worse, the slow recovery of global supply chains and the war in Ukraine, have further exacerbated the rise in consumer prices.
From high food prices and gas prices to the inability to rent or own an affordable home, things are not looking good for the average consumer. The rising cost of living will inevitably lead to consumers having to make hard choices regarding where their income is spent. This includes decisions on which bills are paid and which are ignored.
According to the European Economic Forecast for Winter 2022 – which did not take into account the conflict in Ukraine – the EU economy had already opened the year exhibiting weaker than expected performance.
It is becoming less likely that European consumers will be able to quickly rebound from the massive spike in household debt accumulation we’ve seen in 2020. Furthermore, by the end of 2021, EU domestic credit had increased by 3.3% YoY to approximately €22.6 million.
While many Europeans have kept their jobs and have actually been able to pay off debts more easily during the pandemic, others have been made redundant and are facing an uphill battle against mounting bills. The latter group of individuals causes worry. It is estimated that, without a month’s income, 29.6 million people in Europe (8.7% of Europeans) would not be able to afford the payment of basic utilities nor a month’s supply of food (Bruegel, 2020). If the income drought lasts two months, that figure jumps to 41.6 million individuals, or 12.2% of Europeans.
Credit management in times of crisis
The COVID-19 crisis had done a great deal of damage to the European economy. By the of 2020, hundreds of thousands of jobs have disappeared and a large part of the European population struggled to make ends meet. Now that the worst of it appears to be behind us, we turn to new challenges like the economic impact of millions of refugees from Ukraine seeking jobs and housing, as well as high price inflation and other factors.
The predictions for 2022 are muted. It is therefore important that companies review their debtor management practices in good time.
How do you ensure that, in times of crisis, customers continue to pay on time? How do you ensure that the dunning process increases loyalty instead of costing you customers?
The appropriate strategy should place the customer at its centre. Businesses must provide customers with personalized payment experiences. Furthermore, it is essential that debt collectors anticipate difficult situations and think along with customers preemptively, in order to come up with customer-friendly solutions that work.
3 steps to achieve better collection results in 2022
With over two decades of experience in the customer-friendly collection of outstanding invoices, Alphacomm is a trusted veteran and a proven specialist within the field. That’s why we’re confident that 2022 can still be a pretty good year for credit management, if the right approach is taken.
By following these steps, you can help your customers develop payment reminder strategies that deliver results.
Step 1 – Put the customer first
Make it more efficient and more user-friendly for your customers to pay by digitizing your credit management processes.
Step 2 – Personalize your approach
The next step is to increase your odds of success by offering multiple types of payment reminders that are personalized based on customer demographics, payment history and even literacy level.
Step 3 – Think like your customer
Finally, but at least as important, is the availability of payment options. Provide your customers with a wide choice of payment methods (from debit card to Apple Pay) as well as the choice to either pay later or pay in instalments. This way, there will always be a solution that works out, no matter the situation.
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