Cautious optimism with a chance of geopolitical meatballs:  The importance of cash collection in an unpredictable economy.

In times of economic uncertainty, maintaining strong cash flow is critical to providing businesses with the financial agility to not merely survive but thrive in a challenging business environment. It is critical for businesses to ensure they are in the best financial position to either weather the storm or capitalize on opportunities which arise from an improvement in predicted market conditions. Getting paid in a downturn is always more challenging when cash is king everyone will tighten their purse strings and delay payment where possible. In this article we look the importance of cash collection in an unpredictable economy.

A Cautiously Optimistic Economic Outlook

Following the economic turbulence of 2023, businesses across the globe were hoping for greater stability in 2024. And as February closes the most recent economic predictions are optimistic. A global recession looks unlikely to materialise, inflation is stabilising and challenges to supply chains and labour markets are gradually easing. But geopolitical issues are fanning the flames of uncertainty and could easily derail what looks to be a cautiously positive path forward.  As quoted in the Deloitte Monday Briefing  the minutes of the US Federal Reserve’s January meeting stated that the “economic outlook was uncertain and that they remained highly attentive to inflation risk”.

The latest CFO Survey from Deloitte also highlighted this feeling of cautious optimism.

“CFOs start 2024 in a positive mood, but one tempered by high levels of uncertainty. Most economists expect UK GDP growth to pick up from around the middle of this year. CFOs foresee better times ahead, but based on their defensive balance sheet stance, not yet.”

Deloitte “Positive Start to 2024”

Whether looking to exploit opportunities from an economic upswing, or shore up financially to survive a downturn, maximizing cash flow will be critical. And key to a strong cash position is collecting what is owed – the importance of cash collection in an unpredictable global economic environment cannot be underestimated.

Outlined below are three steps a business should be taking to secure their cash collection when the economic outlook is cautious with a chance of meatballs!

1. Identify Risks and Challenges by Territory

Anyone with experience in cross border cash collection will know countries have very different payment cultures and practices. Markets, such a Germany and many of the Nordics tend to be prompt payers, whilst France and Southern Europe slow. Economic pressures can make these endemic traits more pronounced. It is critical to have the right collections strategy and resource in place for each territory. 

2. Secure Visibility of Customer Payment Risks

How many businesses credit check their customers when onboarding and then never review? Businesses that use a credit and collections software platform will have access to data on payment history and patterns which can help them identify changes in customer behaviours. But for many businesses, the first sign of a problem will be a payment default. Taking the time to re-check your customers credit ratings can give you better insight into their current financial health. 

Equally impactful is proactive credit control. A quick call can help identify any payment risks, open discussions around potential solutions, and most importantly help cement those valued customer relationships. 

3. Build flexibility and scalability into your collections process

For those who need to collect cross border payments, there is the added complexity of finding credit-control and debt recovery agents with specialist skill sets. Whether this is local language expertise, knowledge of cultural nuances or access to on-the-ground legal expertise – having exactly the right resource at the right time can prove challenging. 

Working with an outsourced cash collection partner can be a good way of guaranteeing continuity of collections activity. They offer the flexibility and scalability to service peaks and troughs as well as niche markets in a cost-effective manner – often impossible to replicate inhouse. This can enable you take an agile approach to your collections, responding swiftly to identified risks whilst also not paying to over-service when not necessary. 

Conclusion

COVID-19, the Russia-Ukraine war and crisis in the Middle East have disrupted the equilibrium of the world economy. They have had an impact on demand, the cost of goods and supply chains. The resulting global inflation crisis forced governments to make strong fiscal interventions as they attempt to bring it under control. It is a challenging environment for all businesses and one in which business adaptability or agility has been hailed as the key advantage.

Key to adaptability and agility is access to the finance to enable opportunities to be optimised and challenges overcome. It is a world in which cash is king and the often-overlooked function of cash collection has a starring role to play in ensuring agility can be delivered.  Delivering predictability within uncertainty is going to be the key challenge for credit and collections teams. But it is a challenge that with the right strategies in place can be overcome. 

If you are looking to secure your cash collection and would like to discuss how 4D Contact can help, please book a meeting with one of our debt recovery specialists.

Contact us now at: sales@4dcontact.com or on 020 37691487.