How do I know if a customer will pay me?

When it comes to getting new clients, everything is joy and satisfaction for being able to provide them with our service or sell them our product in the best possible way. However, we must keep in mind that many of our customers, depending on their financial situation, may not pay us and you may wonder, how do i know if a customer will pay me?

How do I know if my customers will pay me?

Today, many small and medium-sized companies are experiencing a cash crunch in the wake of the COVID-19 pandemic. That is why you should ask yourself the following questions:

What are the liquidity issues for SMEs in the wake of the pandemic?

According to the barometer published in September of this year by the General Council of Administrative Managers, 26% of SMEs in Spain have cash flow problems after the pandemic. Specifically, some 700,000 companies are experiencing these difficulties. In addition, some 130,000 are technically in insolvency proceedings. 

Some relevant data to know if a customer is going to pay us are that the 8% shows unpaid social security and tax debts14% of businesses have problems paying rents and 27% of businesses have delinquent customers. In addition, 13% of small and medium-sized businesses are not paying their creditors and 10% are in arrears with financial institutions. 

The restrictions in each Autonomous Community, the blocking of tourism or the slowness in returning to normality are some of the inconveniences that are causing the most damage in the liquidity of companies.

Which sectors have more defaults and delinquencies?

Delinquencies continue to rise in the wake of the COVID-19 pandemic. The sectors of the tourism and motoring are the two that have been most affected by this crisis. First came the confinement, then the perimeter closures, and then the fears of contagion.

All these were the devastating causes that practically paralyzed tourism for a few months around the world. More specifically, in Spain, tourism figures since the COVID pandemic fell to numbers of decades ago. Turnover fell to more than half of previous years, and it was the hoteliers who were most affected due to the restrictions between Communities. 

As for the automotive sector, sales plummeted (down 30% compared to 2019) generating job losses (an estimated 8,000). In addition to the increase in non-performing loans, the number of component manufacturing plant closures has grown.

Although after the lifting of mobility restrictions the sector has seen an improvement, production is expected to continue to fall over the next few months. 

3 sectors with the lowest risk of non-payments 

Just as some sectors have been tremendously affected by this global crisis, they are others who have been able to take advantage of and have benefited from it. The branches of public administration and defense, compulsory social security, education, health activities and social services have reached the highest weight in GDP after the pandemic since records have been kept in our country. There has been an increase in investment in health and welfare, estimated at approximately 84.3%.

The telecommunications sector has also benefited in the aftermath of the pandemic from COVID-19. The increase in the use of digital applicationsThe use of cell phones and audiovisual platforms to keep in touch, as well as the need for teleworking, has led to this situation. 

Finally, we place the e-commerce as another of the sectors that has been boosted this past year. There has been a growth of 20% compared to other years, with Amazon standing out, which has increased its traffic in Spain by 252.41%. As for the online food invoicingThe increase of 80% is also noteworthy.

¿How to identify a delinquent customer?

When it comes to collecting our fees, we may find ourselves with delinquent customers or with difficulties to face the payments to which it had committed. In order to be calm at the time of closing an agreement with them, thinking if they will pay us or not (even more so during this post-pandemic period that generates some instability), there are several alternatives that we can use in favor of our security and peace of mind. In this way, we will be able to make better decisions so as not to risk complicating our liquidity. 

Technology advances, and in this field it is no different. Artificial Intelligence has made its way into the territory of defaulters and non-payers, being an element that acts predicting what is going to happen with every customer and alerting us in advance to to know if a customer is creditworthy. Something that eliminates human error and saves on data analysis time, so that we can focus all efforts on the early decision making. 

Predicting non-payments with Artificial Intelligence

A solution for predicting payment defaults for SMEs is Gamco's ARM SaaS software with Artificial Intelligence, which allows to preemptively detect which customers present a high risk of non-payment in order to minimize losses by reducing decision-making time.

ARM-SaaS allows the implementation of predictive models based on Artificial Intelligence. It is modular and can be adapted or expanded according to the client's needs, adjusting to different risk policies and integrating with corporate systems.

With this tool for the prediction and mitigation of the effects of non-payment, we achieve a large improved decision makingThe company's activities include: improving the health of the customer portfolio, reducing the delinquency rate and the provisioning of provisions for bad debts, as well as the contracting of services such as the surety insuranceThat is why we encourage every SME to rely on new technologies.

The period of uncertainty we are living through, especially in certain sectors, often makes operations difficult and we must be cautious. All tool to help us make better decisions must be weighed up. Let's trust in Artificial Intelligence, since it will allow us to know a lot of information without wasting much time on it.