You can increase your chances of getting paid by contacting clients who are facing collections.
When it’s time to get paid, a small business owner may face their biggest challenge yet. Fortunately, you can reduce late payments and build a business radar that alerts you when an account is on its way to collections with a little advance planning. By maintaining open lines of communication and assisting clients who are experiencing financial difficulties as they get through a difficult time, you might gain loyal clients for life.
Customers who are slow to pay typically fall into three categories:
- Customers who want to pay but are unable to do so on time due to legitimate financial difficulties.
- Customers who favor to juggle or postpone payments.
- Customers who will take any action necessary to avoid making a payment.
There is hope for the first two categories. You might be able to control these debts and persuade the debtors to pay in full or in part. Regarding the final group, you must identify it as soon as you can and take serious action, perhaps handing the account over to a collections agency (discussed below).
No matter what efforts you make to collect, the following rule is always true: As soon as you can, get to work, and continue working on the account until you are paid. Send bills promptly, and send new bills every month. There is no need to wait until the month’s end. Once an account is past due, send reminder letters as soon as possible.
More advice is offered below:
- No harassing. Don’t bother those who owe you money, but let them know you are keeping an eye on the situation. You shouldn’t call a debtor more than once per day, and you shouldn’t ever leave messages that contain threats or disparaging remarks about the debtor.
- Don’t get personal; be direct, listen, and direct. Calls should be brief and specific. According to Carol Frischer, a specialist in collections, your aim should be to stop the debtor from taking the call personally, or from equating the failure to pay as a failure in life. Always maintain your composure while maintaining a sense of urgency regarding getting paid.
- Be imaginative. Ask the customer how much they can reasonably afford to pay if they are experiencing real financial difficulties. If the client accepts a new payment schedule in writing, take into account extending the payment deadline. Make sure the customer intends to abide by the agreement by calling the day before the following scheduled payment is due.
- Write letters of demand. Send a series of escalating letters along with the phone calls. Save copies of all communications you have with the customer, and make sure to take notes during every call. If you send the case to a collections agency or take the client to court, you might need these.
- Send letters using a collection agency. A fixed fee can be paid to a collection agency to have them send out several letters on your behalf. This is distinct from giving the debt to a collection agency.
- Offer a substantial one-time discount. If a fairly large account goes unpaid for a prolonged period of time (let’s say six months), and you have doubts about ever being able to recover the debt, you might want to think about making a written offer for a time-limited, substantial discount to settle the matter. A mutual release and settlement, a formal document that discharges the debt, can be used to put an end to this.
- Send the debt to a collection company. Your last resort is to send a debt to collections. Typically, a collection agency will pay you 50% of the money it collects. Of course, there are instances where half is preferable to nothing.