Every business owner has had the inevitable problem of payments not being made on time. What can be done? While there may be no silver bullet when it comes to a solution, there are many tactics that can be used and preparations that can be made in order to keep one’s business running smoothly with cash flow.
First and Foremost:
Stay professional. Anything less than professional puts further business with the customer in jeopardy. No matter what road the customer takes, the collector must always take the high one.
Keep Newer Customers on a Shorter Leash
Taking on new customers is always a risk, therefore there needs to be a process in place in order for them to prove themselves. This is especially true for businesses that provide a service that occurs before the payment is received. A tactic that can be utilized is making the payment terms shorter than usual; this will give insight into whether the customer is serious about building a long-lasting relationship.
Alert the Customer Immediately of Payments Not Received
Seems simple enough – the quicker a late notice is sent, the quicker a payment may be received. However, there are many aspects that fall into this category.
Keeping instructions easy to follow while being persistent with follow-ups can be highly effective. This includes sending emails and making phone calls. Then there is the question of troubleshooting.
What if it was a systems problem and the customer actually sent payment? Or even worse, what if something fraudulent is happening? These questions need to be asked and answered when communicating with the client.
Be Stern When Needed
An aggressive tone during a first notice will only make the situation worse. It is when phone calls stop being answered and emails/snail mail stop being replied to that the tone needs to change. The key is to get the customer to respond and open up talks, and with an overly aggressive tone at the beginning, this may hurt the chances of getting paid and receiving further business.
Be Flexible with Payment Options
Depending on what kind of business you are running, accept as many different kinds of payment options as possible. A brick and mortar store should accept cash, check, and debit/credit at the least. An online store may have even more options that should be acceptable, such as PayPal. Flexibility is the responsibility of the business owner and should be explored as payment options do evolve; such as Apple Pay, Square, and Intuit’s GoPayment.
Being flexible also means accepting payment in different ways. The last thing that you want to happen is a customer on the phone saying they can pay over the phone, then you not having the ability to do so. Other payment options that should be accepted are in-person, online, and through the postal service.
Flexibility may also mean working with the customer, especially if the economic climate isn’t so bright. This may involve setting up a payment plan over a set amount of days/weeks/months.
If a customer has an incentive to pay earlier, it is more likely that money will be collected. This may include offering a percentage off for paying before a certain amount of days have passed or paying with a certain method. However, if a business does not want to give out these type of perks, then they may offer a percentage off the next bill or even free shipping on the next shipment depending on what the actual business does.
If your business has its own collections staff, it is highly important to keep them trained and give them the right tools to do their job. Software is always evolving and needs to be updated in order to keep up with the times.
Avoiding Collection Agencies
Use collection agencies as a last ditch effort. There are a couple reasons for this: first, they will take a part of the payment if they can recover money from the customer. Second, this may ruin a relationship between the business and the customer. Collection agencies can be effective, but there are definitely many issues that need to be thought about before a business gets to this step.
If anything, be polite and understanding, and know when to escalate the problem. If you can do both of these effectively and efficiently, then the problem will eventually turn itself around and a very rewarding business partnership on both sides could blossom.