Is there a way to collect on delinquent accounts without damaging the customer relationship? Should your success be solely derived from getting new clients in the door and servicing existing customers? Keeping cash flow management, administrative organization, and the ability to set and keep firm payment terms as part of the equation, will ultimately lead to a better understanding of delinquent accounts and certainly a better chance of collecting them.
So you have the monopoly in your area of expertise. New clients walking in the door on a daily basis and existing customers that are continually using your services. It seems it couldn’t possibly get any better and the books are showing that you should be smiling all the way to the bank. But, in reality cash flow is making it extremely difficult and the light at the end of the tunnel seems to be a flickering candle just waiting for a puff of wind to knock it out. How could this possibly be? Your focus has been based on turning another invoice and lack of focus on making sure previous invoices are getting paid. You take great pride in providing an outstanding service, and have built a relationship with each new client that has walked through your door. There is just no way that a client would possibly try and avoid you, correct?
In an ideal world this would be the case. However, within any business, there will always be the customers who are going to be difficult to collect from in a timely manner. Sometimes, it’s just a matter of forgetfulness, money being tight during the month, or just a complete lack of organization. And there are those cases where they just simply don’t want to pay. And, without proper follow up, it makes it seem as if this is acceptable.
Here are a few proven techniques to ensure that your customers follow the guidelines and gives them the best chance to pay you on good standings and on time.
Invoice – Probably seems to be the most obvious, but stick with me here. This process has to be the most consistent part of the process. It doesn’t matter how big or small the invoice either. Don’t try and hold a smaller balance and add it to another invoice in the weeks or months to come. I know the thought process can sometimes be, you will save money by not having to deal with the cost of sending an invoice and won’t have to deal with the aggravation of dealing a small amount on the books.
Saving a smaller invoice to add on to a larger one can cost you in a number of other ways:
•By the time you finally invoice for your service, the customer could have forgotten about what the charge was for and dispute the charge.
•The customer may not return for a myriad of reasons and leaving you no reason for a further invoice. Your basically stuck with no reason now to invoice for the smaller amount that was previously due.
•For a lot of consumers, paying a smaller invoice is easier than a larger one. By waiting you have created a larger invoice that may make it tougher for the customer to pay on time, or at all.
•If the smaller amount isn’t important now, why would it be in another month or two? You may just end up overlooking it all together.
Remember, the customer came to you in the beginning knowing that they would be charged for your services, it’s important that you follow through with an invoice no matter the balance. Overlooking a smaller invoice may mean you’ve set the customer up to fail when sent a larger invoice.
Invoice again, add interest- I know it can seem that sending another invoice is a waste of you resources, but remember, several factors could have played into the payment not being received:
•The first invoice was never received. This does happen.
•The invoice was buried or filed away. Out of sight, out of mind.
•It was buried away in hopes you did the same.
Resolutions to any of the above situations can be a simple as sending another invoice. This time, advise that you will add interest if not paid by a given date. This may be the motivation the customer needed to make the payment.
Be persistent and consistent- It’s now time to follow up that second invoice with a phone call and or depending on the relationship, an email. However, an email can be just as easy to overlook or forget about as your invoice. If there is an issue that needs to be resolved, then speaking with them on the phone can be more effective than just an invoice. There may be an issue that the customer has, but is failing to communicate with you. Simply avoiding the invoice is easier than confrontation. Again, your phone call initiates the communication and makes it easier for the customer to explain themselves.
COD for any problem customer- If a customer has a history of making late payments, don’t be afraid to ask for the payment up front. If the customer has any quarrels with it, let them know that it’s now policy.
If there are any outstanding invoices, then it makes perfect sense to let the customer know that any additional work will be paid for up front until the delinquent invoice(s) are paid. If the customer doesn’t like your new methods and you have kept to the steps listed above to resolve, then they probably don’t have plans to pay you anyway. You’ve probably saved yourself from sending another invoice that will never be collected.
Don’t be afraid to cut them loose. A customer that continually pays late will rarely lead you to a customer that pays on time. Don’t continue to provide services, know that sooner or later you’re going to get burnt.
Be firm and up front with your policies for all new customers- Being loose with policies or not being up front with new customers in order to get their business could lead to issues down the road. Being honest, and firm with your payment policies up front will not offend anyone and they will be more apt to accept your terms.
Be confident – Knowing you provide a valuable service and stand behind your work will shine through when you’re making the sale. This same confidence should show when you’re collecting a delinquent account. Approach a delinquent account as confident as when you sold the product or service, and chances are, you will get paid.