Tips for handling non-paying customers and promoting positive cash-flow in difficult times

By:

Alex Vargas, President and Credit controller consultant at Active Solutions

Me David Durand, Founder, Lawyer and Trademark agent at Durand Lawyers

Getting paid is an essential component of your business. Positive cash-flow allows for the payment of operating costs, settlement of debts, and provide a buffer against future financial challenges or economic hardship. Here are a few tips for a healthier cash-flow:

1. Breathe

You are not alone. Millions of Canadians are facing similar problems to yours in times of COVID-19, and both the federal and provincial governments, as well as some financial institutions, have proactively extended various plans to assist Canadians in overcoming financial hardship, including Canada’s Economic Response Plan and Quebec’s Temporary Aid for Workers Program. That being said, it is still very important for you to get a handle on your financial health. How?

2. Focus on managing your accounts receivables

Five (5) tips for a healthier cash-flow:

1. Make sure to go through all of your unpaid invoices;

2. If you have vulnerable customers/clients, work closely with them to assess their payment capabilities and be able to conclude payment arrangements;

3. With the current situation, make sure that invoices are still sent to the same locations;

4. Adjust your collection process to fall in line with the current economic situation;

5. If you can’t get paid for an outstanding account, stop supplying any further services or products (if possible), and send the appropriate notices to your customers and/or clients as per the terms agreed upon in your contract.

3. If I’m not successful in getting paid, what do I do?

There are few options available to you, namely:

1. Engaging an accounts receivables management firm;

2. Adopting a more aggressive debt collection procedure, such as commencing actions on account, although this approach may require additional time and funds;

3. Exploring debt relief measures options, such as:

• negotiating debt with your creditors, including financial institutions, credit card companies, lenders, as well as other suppliers;

• exploring insolvency and restructuring provisions under the Bankruptcy and Insolvency Act and/or creditors arrangements under the Companies’ Creditors Arrangement Act.

In all events, it is important to:

• review your agreements, in particular, material contracts, be it customer, supplier, financial, lease agreements, as well as insurance policies to determine what protections you may be contractually afforded (through risk transference) and whether force majeure provisions apply. By way of example, in credit card agreements, you may have opted for balance protection insurance, which: (i) pays out your outstanding balance (subject to any limits in the policy) or (ii) makes monthly payments on your behalf to your credit card issuer if your income is interrupted by unforeseen events;

• before taking legal recourse against those that owe you money (your debtors), (1) assess if they have cash flow problems or are insolvent, and (2) make sure that the information on your invoices is accurate and up to date.

4. Hold professionals accountable to you, as they cost you money as well.

Take-aways

Whether your financial condition is good or bad, engaging the right professionals (i.e., external accounts receivables specialists, accountants, lawyers, and/or licensed insolvency trustees) early on in the process and holding them accountable is important in order to maintain and improve your business’ financial health and your own for that matter.