In Africa especially in Uganda, courtesy is a very valued commodity. This is reflected in all our cultures across the country and the testimonies of various peoples all over the globe. Emmanuel Maraka of Dolen Ffermio writes of his wonderful experience with warm Ugandans and Discovering Innitiatives, a tour company on their website, has rated Uganda as one of the countries with the politest people. This is just to mention but a few.
The challenge for a Ugandan Business in debt management therefor remains how to stay courteous and warm and still get your dues without undue unpleasantness.
That is the challenge of the post paid service providers today in Uganda; to run a business and still maintain this brand.
Poor Paying Culture
We in Uganda seem to have a poor paying culture. Sometimes it is due to the instability and lack of accountability in the way some of our service providers run their businesses (take the examples of Greenland Bank and GTV rolling up and leaving customers in the rut without warning), or it is just the fact that we lack the integrity to stay true to our word as customers.
Most people I have discussed this phenomenon with state that in most cases they pay not out of obligation but really out of a fear of the consequences. Either fear of embarrassment, a law suit or loss of continued service, etc. The only people who seem genuinely disturbed by the obligation to pay seem to be housewives whose priority is financial security for their families though even with them fear of consequences is still the driving force.
Capitalism encourages the ‘something for something’ culture which has come with its own evils. So one is at pains to explain to a consumer why a service they have already consumed should be a priority on their current budget.
So how does a post paid customer centered service provider thrive in this market environment?
Below are a few strategies which if employed may yield results.
Help the Customer Maintain a Good Credit Rating
Experience has shown that anyone given the chance will accumulate more debt than they can pay back. Your business needs to go beyond just providing the service to enabling the customer to pay for the service and keep their debt at a manageable minimum.
This can be done through:
- Setting credit limits for customers according to consumption and firmly insisting on zero balance payments on current billing
- Keeping in touch with customers to avoid issues like liquidation or the customer changing address without your knowledge.
- Owning arrears and setting ourselves personal targets on reducing them
- Breeding a paying discipline within your staff first. They cannot sell what they do not practice.
Assess the Credit Risk of Customers
Urlich Schmitz Head of Service at Stadtwerk Duessoldorf states;
“By identifying the risk of payment default early on, we can initiate timely coordinated measures.”
Every business is bound by a supply obligation which exposes it to higher credit risk. However, with timely deployment of appropriate measures this risk can be significantly reduced.
If the business has a high quality of data management it is a lot easier to actually try and identify the credit risks individual customers pose..
If for example we classify customers according to credit history, it will probably be a clearer guide to debt management than anything else for instance;
- Possible outstanding debts can be recalled immediately
- Suspect and absentee customers can be asked to pay in advance
- All other customers can be reminded and the really difficult ones referred to debt collectors
This would provide a more systematic approach to debt management and such flexibility has been known to yield impressive results for example it helped reduce Stadtwerk Duessoldorf’s losses by 13% and increased turnover by 18% in just one year.
Changing Policy and Practices
Looking at the paying culture, I have heard arguments from finance scholars who believe in and advocate for delaying payment as much as possible (the analyst’s argument about receivable days against payable days’ ratios). However, it is my submission that these practices are in the end retrogressive.
Take for instance a simple commercial process. A customer applies and pays for a construction service or a utility service which should be due immediately but because of delays to pay the suppliers by the company, the relevant materials are lacking and the connection is delayed. When finally connected, the disgruntled customer becomes an unwilling payer and arrears accrue. Haven’t we then shot ourselves in the foot?
It is a fact that behavior like this will not change without serious policy review and an overhaul of some of our retrogressive processes in all departments. However, imposing strange unpopular policy can create problems as well. Businesses in Uganda therefore need to recognize the need for change like the Mice in ‘Who Moved My Cheese’ by Dr. Spencer Johnson and set out in search of better ways to achieve our goals and manage our debt.
Some of the things to note about how to allow policy to flow with the times include;
- Credit and collections management should be an integral part of customer relationship management
- Risk evaluation and not only turnover should stand at the fore front of customer assessment
- In order to achieve a comprehensive segmentation, customer data should be complemented with external information like social demographic data or key market figures
- All measures and collection procedures should be fine tuned to reflect individual customer behaviour and be flexible enough to take into account changing risk scores of customers
Additional Tips on Improving Debt Collection
The ordinary debtor will usually succumb to ordinary collection methods. The extraordinary debtor requires something more forceful. There is, of course, always the debtor who cannot pay just simply because he has not, and cannot get, the money to pay, and with whom ordinary or extraordinary collection methods avail nothing. The majorities of those who fail to pay their debts are not, however, of this class, but are just difficult people who are trying to get something for nothing. In such cases almost any device within the limits of the law is justifiable. However these means should be the last resort.
As a rule, however, the collection of the debts usually denominated noncollectable is not a matter of hardheartedness. It is merely a matching of wits between the collection manager and the delinquent debtor. Bearing in mind the fact that the business seeks to remain customer centered, these methods should be used with utmost care and consideration for the customer.
Steady, Persistent, and Consistent Customer Contact
Constantly keeping in touch with the customer has the added psychological pressure of not allowing the customer to forget about his indebtedness. We have to be like the persistent widow in Jesus’ parable who got justice not because the judge thought she deserved it but just so he could get her off his back. Perseverance gets results and life is not about how many times you fail but how many times you get up and try again. Abraham Lincoln and his numerous failed attempts to win elections is a perfect example. His eventual phenomenal success tells it all…it is not really the greatest successes that are famous…it is what they overcame to get here that got them noticed in the first place. So let us embrace our nemesis ‘arrears’ and wait for the glory that will come when we finally overcome them. And let us ALWAYS remember that customers are not numbers: consequential and respectful interaction with them is the key to success. After all as we say they are the reason we exist.
The struggle continues!!!