Trade Credit

Uncovering the collections process of a Digital Trade Credit solution


Getting paid on time is excellent – we all love receiving the money we’re owed without having to chase customers. But debt collections probably rank among the least favourite of your activities as a business owner. The process of chasing payments can be a real drain on time and resources that would be better spent growing your business.

However, the importance of a robust collections management system cannot be overstated. It’s reported that 3 in 5 small and medium sized enterprises (SMEs) are currently waiting on funds that are tied up in unpaid invoices, and 50,000 SMEs in the UK close every year due to late payments.

Fortunately for you, there are people who live and breathe collections – and one of them is Hokodo’s very own Head of Collections and Claims, Blair Cooper. In a recent webinar that wrapped up a series exploring the six core elements of a Digital Trade Credit solution, Hokodo’s VP of Marketing, Lucy Heavens, joined Blair to explore the world of collections. In this blog post, we recount the six key lessons learned from the webinar. 

1. A one-size-fits-all approach to collections simply doesn’t work

Kicking off the webinar, Blair shared that personalisation is key to a successful collections process. 

“We make sure that we are tailoring communications to customers based on things like turnover of the business, the payment method they've chosen, as well as things like the country they’re in,” explains Blair, highlighting just a handful of the factors that can be considered when personalising the emails and telephone calls his team has with customers.

A primary example here is that of language and localisation. You don’t want to be sending English language collections emails to German and French buyers. At best, your business appears careless – at worst, you alienate someone who owes you money with an email they can’t understand!

“We have, within our team, 8 different European languages covered, so we can offer a first class experience for customers no matter where they are throughout Europe,” adds Blair.

It’s also crucial to consider the type of business that the merchant has, and the types of businesses that their customers are. 

“For example, we're working with stores that might be selling candles or incense, all the way through to building sites and things like that. Using the same language in an email or having the same approach in a phone call is just not going to work.”

2. Automation is key for collections success…

We’ve heard during several of the webinars in this series that automation is pivotal for the scaling and success of many teams and processes at Hokodo. In collections, this is no different.

“With a pen and paper it can be pretty messy, and it's so time consuming,” explains Blair. “Getting the right people in to do that for you is really hard work,” he adds.

That’s why Blair’s team has integrated a solution called Upflow that automates several key elements of the Hokodo collections process including customer emails, follow-up texts and even reminders for the Collections Officers about when they need to get on the phone to contact buyers.

Every customer is different, so automation enables the team to set different parameters for their communications based on factors like open rate and response time. Every merchant is different too, so automation can help ensure that the collections team is focused on the invoices that matter most.

“If an invoice is €50 or £50 and we think, ‘Hey, is there any point in chasing that?’ If you say, ‘Yes, absolutely,’ we’ll chase it. But if you say, ‘No, let’s just focus on the ones that are five or 10 grand,’ then we can do that as well.”

3. …but collecting payments is all about relationships

Despite the prevalence of automation, Blair is keen to highlight the importance of human relationships in Hokodo’s collections management process.

He recalled recently speaking to the owner of a coastal fish and chip shop who had an overdue payment with one of Hokodo’s merchant partners. The business owner explained that the poor British summer weather had led to a drop in footfall, so the business hadn’t made enough profit to settle their order. They were up front about their issue, and asked for an extra 15 days to pay. Blair was happy to oblige.

“I said, ‘Yeah, absolutely. Make sure you pay that and then come back and purchase with Hokodo again.’ Building that rapport, building that relationship, really helps you mitigate against companies going down a bad road.”

4. Not all customers in collections have bad intent

During the webinar, Blair and Lucy agreed that there’s a perception of bad intent among all customers with overdue payments, but that in the vast majority of cases it simply isn’t true.

“Yes, sometimes there are customers who will take advantage of the situation and know that they can perhaps squeeze a few extra days,” explains Blair, “but 80% of the customers we speak to are genuinely waiting on large invoices to be paid, or waiting on that seasonal flow of work.”

Blair referred to a large construction company in Birmingham that he had recently spoken to about an overdue payment. They explained that they were also waiting for payments so that they can settle their own debts, highlighting the knock-on impact of late payments.

“That's where Buy Now, Pay Later and trade credit is so useful, and where the collections process can have a huge impact.”

5. Traditional collections processes are inefficient

For Blair, the bottom line is that collections is a process which has the potential to drain a disproportionate amount of money and resources from a business.

“I think the main benefit of outsourcing is you can keep your overheads in terms of staffing costs as low as possible. A good collector, or a good team of collectors certainly doesn't come cheap, and especially if you’re an SME and you perhaps don't have a large portfolio of debts that are built up.”

It also takes a considerable amount of time to identify overdue invoices and prioritise them – and that’s before you’ve even put in the hours of calls and emails. “Just having to trawl through those spreadsheets and trying to prioritise which buyers it is that you want to call and when is so difficult,” adds Blair.

When combined with the cost of an internal collections team, the return on investment of outsourcing collections becomes clearer than ever.

6. Hokodo’s collections team acts as an extension to your own

According to Forbes, 96% of customers will stop using a supplier following a bad experience. So, it’s understandable that some B2B sellers might be hesitant about the risk of entrusting a delicate process like collections to an external supplier. But Hokodo mitigates this risk in a number of ways.

First is the collections team’s dedication to providing a superior customer experience matching that of our merchant partners. Key to this is response time.

“It's hugely important to us that we are really, really responsive,” says Blair. “Our first response time for email tickets is less than five hours. And that’s not five business hours – that’s five hours overall for the year.”

Second is by providing full transparency to merchants about all stages of the collections process. Thanks to Upflow, merchants can have full visibility of the communications between Hokodo and their customers. If they want to, merchants can even have an active role in the collections process.

Thirdly, Blair explains, is an emphasis on choosing the right debt collections partners. If his team hasn’t heard anything from a customer at the end of a 45 day period, they must pass the unpaid invoice to a debt collection agency. But the last thing they’ll do is hand it over to some dodgy bailiff and forget about it.

“We are an extension of our merchants and our collection agencies are also an extension of that,” Blair says. “We make sure we monitor their calls, and we talk to their agents to make sure that they are an extension of the merchant’s customer service.”

“We do understand that if we mess up, potentially it's not only business that's going to be driven away from Hokodo, but potentially driven away from the merchant platform altogether, which is obviously the very last thing that we want.”

Watch the webinar in full below.

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