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Offering payment plans to customers:when, how and whyBest-practice guidance on offering payment plans during a recession

IntroductionContentsWhy to offer payment plansIntroduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3When to offer payment plansWhy to offer payment plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Cashflow unaffected customersWhen to offer payment plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Cashflow constrained & Cashflowfrozen customersCashflow unaffected customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Cashflow constrained & Cashflow frozen customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7How to offer customer payment plansHow to offer customer payment plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Offering payment plans with ease:ChaserOffering payment plans with ease: Chaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9About ChaserFurther resourcesAbout Chaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Further resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recession 2021 Chaser. All rights reserved.2

IntroductionWhy to offer payment plansWhen to offer payment plansCashflow unaffected customersCashflow constrained & Cashflowfrozen customersHow to offer customer payment plansOffering payment plans with ease:ChaserAbout ChaserFurther resourcesIntroductionDepending what industry you are in and who you sell to, your customers may beexperiencing some serious cash flow issues. This guide covers best practise guidanceon when, how and why you should be offering payment plans.Late-paying customers are an issue faced by the majority of businesses selling onpayment terms. In the average month, 48% of all invoices are paid late (Xero). Duringtimes of uncertainty such as a recession, the rate of late payments can becomestaggeringly worse. For example, following the announcement of the COVID-19pandemic, there was a 209% increase in the number of late payments globally (CPA,2020)This guide was originally written in the context of the COVID-19 pandemic and thefollowing recession, however, these industry-based considerations will provide avaluable framework when dealing with any customers experiencing financial difficultyand how to best utilise payment plans.Setting up and tracking payment plans takes time Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recessionChaser’s receivables software makes payment plans easy. Set upand chase payment plan instalments automatically, with unlimitedflexibility to tailor reminder messages and chasing schedules to suityour business’ style and your customers’ needs.Try it for free 2021 Chaser. All rights reserved.If the above button doesn't work visit: www.chaserhq.com/signup3

IntroductionWhy to offer payment plansWhen to offer payment plansCashflow unaffected customersWhy to offer payment plansYour business may have some valuable, or long-term customers who are generallyreliable payers, but are going through a financial rough patch right now. The way youdeal with customers during times of difficulty will impact that relationship forever. Tomaintain important customer relationships, your business should be thinking abouthow you can be flexible and support them."Cashflow constrained & Cashflowfrozen customers"People tend to resist that which is forced upon them. People tend to support thatwhich they help to create"How to offer customer payment plansVince PfaffOffering payment plans with ease:ChaserAbout ChaserFurther resourcesParticularly during times of difficulty, reaching out to customers with overdue paymentsand demanding payment in full isn’t always going to be the most effective way tochase invoices. Instead, reaching out and offering a number of different options forpayment will encourage communication and help you reach a realistic agreement. Youcan then find an agreement that works for both you and your customer, and increaseyour chances of getting paid.Setting up and tracking payment plans takes time Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recessionChaser’s receivables software makes payment plans easy. Set upand chase payment plan instalments automatically, with unlimitedflexibility to tailor reminder messages and chasing schedules to suityour business’ style and your customers’ needs.Try it for free 2021 Chaser. All rights reserved.If the above button doesn't work visit: www.chaserhq.com/signup4

IntroductionWhy to offer payment plansWhen to offer payment plansCustomer categorisationWhen to offer payment plansCashflow unaffected customersCashflow constrained & Cashflowfrozen customersHow to offer customer payment plansOffering payment plans with ease:ChaserAbout ChaserFirstly, you should carefully consider whether your business can offer extended payment terms or instalment plans: Can you afford to extend credit for an increased length of time? Do you have the processes in place? What changes need to be made to facilitate offering a payment plan?When deciding whether to offer a payment plan to a particular customer, establish which of these threecategories their business fits into:Further resourcesCashflow unaffected:Those who have negligible to no adverse impact from a recession on their business, such asfood producers.Cashflow constrained:Where trading is depressed but still continuing, like marketing agencies or tech companies.Cashflow frozen:Customers who have had their businesses straight-jacketed by the recession, their tradingis practically dormant. For example during the COVID-19 pandemic this is your travel orevents industry customers.Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recession 2021 Chaser. All rights reserved.5

IntroductionCashflow unaffected customersWhy to offer payment plansIf the customer requesting a payment plan due t is in a Cashflow unaffected industry, either:When to offer payment plansThey are being opportunistic. In which case, you should politely dismiss their request.Cashflow unaffected customersThey are a business that is struggling financially. You should tread carefully in offering them a flexible payment arrangement.Consider future sales to them and consider whether you may need to pass their outstanding invoice(s) to collections.Cashflow constrained & Cashflowfrozen customersHow to offer customer payment plansOffering payment plans with ease:ChaserAbout ChaserFurther resourcesSetting up and tracking payment plans takes time Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recessionChaser’s receivables software makes payment plans easy. Set upand chase payment plan instalments automatically, with unlimitedflexibility to tailor reminder messages and chasing schedules to suityour business’ style and your customers’ needs.Try it for free 2021 Chaser. All rights reserved.If the above button doesn't work visit: www.chaserhq.com/signup6

IntroductionWhy to offer payment plansWhen to offer payment plansCashflow unaffected customersCashflow constrained & Cashflowfrozen customersHow to offer customer payment plansOffering payment plans with ease:ChaserAbout ChaserFurther resourcesCashflow constrained &Cashflow frozen customersFor Cashflow constrained and Cashflow frozen customers who request a paymentarrangements, consider your relationship with that customer, how much you trust them,and categorise them accordingly:Salt of the earth customers:You have a longstanding, trusting customer relationship. You take them at their wordthat they can't pay right now. In this case, no further steps are required to establish whether you should offerthem a flexible payment planRegular customers:You trust them, but not enough to simply take them at their word. For regular customers, you will need more information to establish that they can'tpay you right now and therefore need a flexible payment plan Ask them for a screenshot of their business bank account balance(s) as of today.You need all of their bank accounts to get comfort about their total cash levels Ask them for a screen shot of their business bank account balance(s) from 30 daysago. Again, you need all of their bank accounts to get comfort about their total cashlevels Check the most recent annual accounts for the company on Companies House (UKbusinesses). Look at the cash balance on the Balance Sheet. This balance will likelybe from some months ago. Check that it is plausible that the above bank balancesare all of their bank accounts (i.e. they are not concealing available cash)Distrusted customers:You have active reason to not trust what that customer says. Offering payment plans tocustomers: when, how and why:Best-practice guidance on offeringpayment plans during a recession 2021 Chaser. All rights reserved.You need more information to establish that they can't pay you right now andtherefore need a payment plan1.Firstly, complete all of the same steps as for ‘Regular customers’2.Ask them for their company balance sheet from the most recent month end3.Ask them for a profit and loss account for the last 3 months7