The decision to negotiate with your customer or send the account to collections will often depend on your business.
Occasionally, especially when a relationship is at stake, it may be wise to negotiate first, but here are some things to consider:
Are you willing to re-negotiate your original payment terms? If so, maybe it’s time to consider them. If your customer thinks that they can pay in net 45 days, as opposed to net 30 days, that’s a potential starting point. In this scenario, negotiate to get some deposit on the full balance up front, a post-dated check for the full amount or over a short period of time, as well as the new terms in writing. These steps go toward proving that your customer is serious about the balance they owe and not just stringing you along and buying time.
Can you work with a payment plan? If you’ve tried all the strategies for getting payment in full and they have all bombed, one of your options is to offer payments. Be sure to start your negotiation with two payments and slowly agree to more only when you must and get the agreement in writing.
Are you communicating regularly? Be creative in how you connect with clients. Send emails to your customers just checking in to nurture the relationship beyond just business, showing them you care and that you’re paying attention. Creating an emotional connection between you and your customer, makes it harder for them to take advantage of you. You may find that by establishing a trusting and communicative relationship with your customer, they are more likely to pay you on time or at least give you fair warning that a payment will be late.
In your considerations, be mindful that while negotiating with your customer might be helpful in recovering past-due payments, you must also remember to protect your business, your bottom line and your cash flow.
Hanging on to your accounts, six to ten months, instead of four to six months is like playing the lotto. You might possibly win a huge jackpot, but the odds are you will lose consistently.
A bad debt is not like fine wine or cheese; it doesn’t improve with age and a piece of paper in your drawer is not money in your bank. Your aging receivables rapidly become less recoverable with time and reduces as much as 10% a month thereafter.
So if you realize you cannot afford to negotiate, it may be time to send the account to collections which will free your time to focus on your customers who are making their payments on time.
After all, the sooner the account is sent to collections, the greater the chance of recovery.
And in reality, you need not be afraid of outsourcing potential bad debts. With a good debt collection agency you don’t lose control, you only bolster your existing credit control department.
Please visit Dynamic Legal Recovery’s website or call us at 877-777-7564 for your complimentary evaluation.