Often small business owners, particularly those that have built a rapport with regular customers, will err on the side of caution when it comes to collecting on overdue accounts fearing that alienating current clients is too high of a risk and opt to write-off the debt as a safer choice.
However, allowing delinquent accounts to lapse, without taking appropriate measures to collect them, is unnecessary and detrimental to your cash flow.
What businesses of all sizes need to understand is that the problem of debt collection is less a question of whether to collect, but rather, how to collect in an effective way.
Firstly, creditors should implement a pre-emptive accounting process before an invoice has the chance to reach severe delinquency. Subsequently, it is imperative to learn effective recovery techniques that balance the collection effort with the ongoing sales effort.
PRE-EMPTIVE PROCESS –
Proactive accounting is ultimately about having clear overall steps to follow once a customer has been invoiced, and an equally clear understanding of processes involved in following this up.
It is important to begin communication with your customers early and detect any potential problems with their order. Bad debts can arise from simple disputes and convenient memory loses. It is wise to also include your credit terms and conditions agreed to by the customer along with a copy of their invoice. A Customer Satisfaction Verification Letter, sent immediately following delivery of products and/or services along with an invoice specifying the due date, eliminates any excuses for your customer to not pay an invoice.
Effectively, you are closing all possible problems and excuses that could cause delayed or non-payments thereby making the collection process easier.
COLLECTING WITH CARE –
Professional and effective collectors will always provide a customized approach with their customers and allow for flexible payment options when it makes sense to do so.
Customers are far more likely to respond positively to a slow and calm approach than a frantic phone call three months after the due date has lapsed. Listening carefully to your customers and tailoring your approach depending on what you hear is key.
- Utilize a sympathetic approach – If your customer can’t afford to pay, talk them through their finances to find a way to pay…whether that means making small monthly payments for an extended period of time, or borrowing money from a family member.
- Utilize a more firm approach – If your customer feels they shouldn’t have to pay or they don’t want to pay, explain that you will have no choice but to turn them over to an outside collection agency, which may hurt their credit.
When preventative strategies are applied from the outset of your business relationships, coupled with a customized collection approach, steady cash flow need never be an issue.
Please visit Dynamic Legal Recovery’s website or call us at 877-777-7564 for your complimentary evaluation.