While there may be many unknowns when running a small or large business, one thing we know for sure is that late-paying customers and clients are part of operating any size business. If you have clients, there will be a percentage of them that will either pay late or in some cases not pay at all.
Before we get into some of our tips for dealing with customers that do not pay, we would love to offer you some sound advice as you navigate this part of your business. And before hiring a collection agency, you should get comfortable with a few things.
One of the first things that should come to mind is that this is your money. You were asked by a consumer to provide services or products and you did your part. Never doubt that this money is owed to you by your customer. If there is a dispute, they should inform you of that but if you did the work, you must be paid.
Another thing to be conscious of is to not get angry when customers owe you money. You should leave the emotions out of any financial transaction, especially when someone hasn’t paid you. You accomplish nothing by getting angry and if that customer witnesses that anger, it will only take you longer to get the money that is owed to your business.
We understand you may be sick and tired of late payments. But you need to keep your cool.
You must communicate with customers that have not paid
We’ve talked numerous times here about the importance of invoicing on time for any size business. This is not only critically important to getting paid, but it helps maintain your relationships with customers.
However, before you invoice you must communicate payment terms upfront and be as clear as possible with your customer. There should be no doubt as to the way your business needs to get paid for services. Place your payment terms in any agreements or contracts or create a separate document that is submitted to the client at the beginning of any relationship. We also find many businesses send out updated payment terms such as every three or six months.
Communication also comes when customers have not paid or met your agreed payment terms. If you find a customer is weeks beyond an expected payment date, issue a formal statement either by email or mail.
We also find a gentle phone call to the customer can be very effective and getting a customer to pay. You can even position it as a friendly customer service call and then remind them that they may have missed a payment. It is one more form of communication and you may find that the missed payment was nothing more than an oversight.
In short, always communicate with your customer.
Offer multiple ways for payment
If your business is only accepting paper checks, that could be hurting your cash flow. Whether you are running a small business or professional services firm, the time is now to implement other types of accepting payment. You may have resisted but you will soon have no choice. We saw many businesses during the COVID-19 pandemic switch to multiple forms of payment including restaurants that used online payment and touchless forms.
There are many ways you can accept payment other than a paper check. And there are many companies handling merchant services that can offer you a wide variety of options including website embeds, and payment forms such as Apple Pay. While you may lose a small percentage, getting money in the door faster rather than 90 or 120 days later is far better for cash flow.
Hiring a collection agency is a smart move
Yes we are a collection agency and we may be biased as we discuss this but there are clear benefits to your organization when you hire the right firm for your business.
A collection agency can save you time and other resources. If you are chasing down customers that have not paid and that is taking you away from serving other customers or going out and getting new customers, that’s a problem. The right agency will free up your time while improving your cash flow.
A debt collection agency can also create urgency around your bill and get that paid much faster. Let’s face it, many times a letter or a phone call from a collector gets that issue resolved quickly.
A professional collector can negotiate on your behalf. Their job is to get you paid but their other role involves understanding where the consumer is at and whether they can afford to pay you in full. In many cases, they cannot and that requires structuring some type of plan to pay you back. A professional collector can do this for you. While you may not have payment in full, you’re getting something they have agreed to.
Collectors can help you keep your customers. That’s right, they can preserve the relationships you have with existing customers. With cordial discussions in an understanding of their financial situation, a collector will help your customer feel comfortable coming back to you for services.