At times invoice finance operational staff can find responsibilities for providing good customer service and managing risk directly conflict with each other.

In this follow up to my article Invoice finance problem clients: Are they worth your time? I show you how you can take steps to manage these conflicts:

Know your client
    • Understand the risks associated with your client. Also know what the warning signs are, so that you are better placed to manage the issues.

Know the industry sector
• Understand the normal trading patterns of your client’s industry sector so that you are well placed to notice if your client’s trends are outside the norm.

• Train staff to be specialists in specific industries to deepen your knowledge of your clients.

Change the facility

• Move your client onto a higher touch facility so that risk can be more closely managed.

• Disclosing on the debt provides invoice financiers with additional comfort. Unless there is collusion between a client and its customers, you will find that customers are normally all too willing to tell you want is happening.

• A change of facility also allows you to increase fees and generate compensation for the extra work and risk.

Manage your exposure

• Manage disapprovals and limits in order that the ledger can be collected out and the exposure repaid in full.

Change the team

• Personality clashes can exacerbate a problem. Know that a fresh set of eyes can help identify risk.

• Furthermore fresh eyes remove any concerns that relationships are clouding issues.

• Have a specialist team that can help manage high-risk situations.

Talk to senior management

• It is never a good idea to try to manage high risk or difficult situations on your own. Chances are that a colleague or manager has experienced a similar situation in the past and will be able to provide you with valuable advice and assistance.

Skills alignment

• Some client managers are suited to building and maintaining relationships. Others are better suited to managing risk. Place difficult clients with client managers with the right skill sets and you will be able to better manage a problem situation.

Undertake an audit

• Put a pair of fresh eyes on the client.
• Check the supporting paperwork.
• Get feedback about people and processes, as well as a general update of the financial position of the business.

Appoint an investigating accountant

• Better understand a problem client’s financial issues. Also, confirm the validity of security.

• Get help planning exit strategies.

Give the client notice

• Some invoice finance companies are better suited to managing challenging clients than others.
Some issues with the debt may only crystallize if a client ceases to trade. If failure looks likely, know that your safest option is always to manage away the client.

Appoint an Administrator/Receiver

As a last ditch option you may be forced to take control over your security. However note that this option may add additional cost to the exposure and may generate unwelcome publicity.

Manage your exposure

• Manage disapprovals and limits in order that the ledger can be collected out and the exposure repaid in full.

Do nothing and hope for the best!

There is no exact science for managing difficult and high-risk clients. Risk management is only acquired through a combination of experience and training.

It is questionable whether income received from problem clients in anyway compensates for the stress and risk in managing them.

Operational staff generally receive job satisfaction from providing good customer service, as opposed to dealing with volatile situations.

Many invoice financiers pride themselves on the service they provide. Therefore quite rightly they may not have the right people, processes and systems to manage difficult clients.

Author: Simon Belton:  Simon has worked in all areas of the invoice finance sector. He is experienced in business development, risk and client relationship management.

Get in touch for details about Simon’s invoice finance training and consultancy services.

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