Granting leniency: exception or rule?
There have been rules since time immemorial. Rules that determine what you can and, above all, not do. Without rules, chaos would probably ensue. Organizations impose rules on their customers in the form of general terms and conditions, including the rules regarding payment terms, billing and costs. Rules that the customer has probably never read, but that will be applied if payment is not made. How far do you want to go with these rules and how consistently do you apply them? Is everything black and white or are there also grey situations where the human dimension weighs much more and just a little bit more — maybe even leniency — is possible?
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It is not surprising that organizations draw up general terms and conditions. These rules make it clear what rights and obligations their customers have. In addition, they offer justice and equality. Without the terms and conditions, there is a risk of arbitrary treatment. And random treatment is just not what you want as an organization, because you prefer to treat every customer equally. Unfortunately, this is not the case with credit management. After all, the days when you can approach everyone in the same way to enforce a payment are long gone. “Segmentation” is the word here.
Segmentation
Segmentation is the division of customers into separate groups based on various criteria, usually related to geographic and demographic data. For example, region, city size, age, and gender. Customers within a segment show similarities based on these criteria. This segmentation is still quite crude and does not take into account the customer's payment behavior. Based on payment behavior, customers can be divided into four groups: customers who can pay immediately, customers who can pay later, customers who can't pay and criminals. Each group has its own limitations and opportunities.
Do not pay
Unfortunately, every organization has to deal with it: customers who can't pay. In many cases, these customers have no direct influence on this themselves. Life is full of surprises that can limit financial opportunities. Customers who have been paying faithfully for years are suddenly no longer able to meet their payment obligations due to an unexpected situation — loss of job, divorce, death of a partner. Debts are piling up and help is needed. Fortunately, this help has been arranged in the Netherlands. And yes, of course, there are plenty of areas for improvement in that area, but customers can be helped. It's up to organizations to quickly recognize this (sometimes hopeless) situation and to direct the customer to the right counter.
Pay later
Customers who can pay, but who don't like it right now. That's the group of paying later. These customers are experiencing a temporary financial dip, but are still able to keep their heads above water. Organizations should not push these customers down, but approach them with appropriate solutions. Such as proactively offering a payment arrangement. This life buoy can already be offered automatically from the invoice. This way, the customer is immediately helped and the final age of the invoice is limited. Customers will appreciate this extra service and will remain (or become!) ambassadors for the organization.
Pay now
In theory, the group that can pay immediately meets its payment obligation the fastest. Unfortunately, the practice is more unruly. An important point of attention for organizations here is: how do you get the invoice to the attention of these customers at the right time? How do you prevent your invoice from ending up in the big pile or in an overcrowded inbox and having to wait until it's your turn? Organizations should therefore invest more time and energy in creating the best invoice. The invoice that comes on top of the stack, or better still: is paid immediately.
Never pay
Of course, there is always a group of 'customers' left who do not want to pay. Fortunately, in practice, this appears to be a small customer population and, in many cases, this group is easy to recognize. Especially with the right controls and restrictions at the front end of the process. The credit management process for these customers must look austere and sleek, and you should quickly consider transferring to a bailiff. Transferring the customer to justice may still be the most effective.
Applying rules
Looking at the four groups, the rules concerning payment terms, billing and costs actually only apply to the latter group. The group that will never pay. So how much use are those rules? If you invest all the time, energy and money into this group of criminals, the other customers will suffer. Indeed, strict rules are being introduced for criminals, which also apply to willing customers. For example, it is possible that a high-paying customer is strapped for cash and is not allowed to conclude a payment arrangement, just because the organization's rules do not allow this.
Leniency
Coulance is exceptionally provided when customers are in an emergency situation, due to a life event or unexpected event. Or in case of force majeure, such as natural disasters or pandemics. Organizations can then be lenient and show flexibility in their rules, for example by offering payment arrangements or deferral. Unfortunately, leniency is not standard and organizations want to reassess over and over whether it is appropriate to deviate from the rules. You may wonder if leniency should not be the rule. Or are replaced by normal interaction with each other. Where human goodness plays a much more important role than the rules that we increasingly impose on each other.
Source: Dennis Faas | VVCM 2024 01
