You’ve waited too long to send customers to collections-Here’s what to do next

Many business owners and operators have said the same thing. “I’ve let this go on for too long.”

What they’re talking about is getting their customers to pay on time.

The customer promises they will pay next week. Then another month goes by. Maybe an email comes in explaining why they need more time. And you give them more time.

You know you need to preserve the relationship with your customer, possibly avoid conflict and believe they will eventually pay you. But that never comes in.

Now you’re looking at multiple situations of aging accounts and you’re wondering why you’ve waited far too long to take appropriate action. There’s no sense in beating yourself up about the situation. It’s just time to correct course.

Here are steps you can take right now to improve your chances of recovering what you’re owed and prevent this negative situation from happening again to your business.

Stop waiting for the perfect time to ask for money

We find that many business owners and operators continue waiting because they hope one more phone call or the customers’ next promise will result in payment.

Unfortunately, that’s rarely the case because the longer past-due accounts remain unpaid, the less likely they are to be paid by promise.

There are many reasons why customers do not pay, including financial difficulties, a change in employment status, relocation, or disputes. This is why prompt and consistent communication with your customers who have not paid is critical.

And because when accounts have become seriously overdue and your internal collection efforts have stalled, it is time to accept the fact that continuing to wait is unlikely to change the outcome.

In short, stop waiting on promises to pay.

Review all your overdue accounts

Before your business takes action, you should examine your accounts receivables with fresh eyes and even a professional such as your CPA or bookkeeper.

Look at some of these factors.

• Which invoices are 60, 90, 120 or even past that overdue?
• Have certain customers stopped responding?
• How many promises to pay have repeatedly been broken?
• Are there legitimate disputes or are payments simply being delayed?
• How are you following up with customers that do not pay?

Taking a hard look at these questions can help your business determine which customers still deserve additional communication from internal resources and which should be moved into collections.

Gather necessary documentation for customer accounts

One of the biggest stumbling blocks a business may encounter is scrambling for necessary documentation or paperwork when they decide to send accounts to collections.

You can make the collection process much easier if you’re organized with these types of documents.

• Signed contracts or agreements.
• Purchase orders.
• Invoices and statements.
• Service delivery confirmations.
• Emails discussing payment.
• Notes from phone conversations about payments.
• Any payment arrangements that were agreed to and not follow through.

Make one final professional contact before collections

Before forwarding any account to your collection agency, you should send one final communication that is clear, respectful and direct.

This communication should let your customer know that the next communication may be from a debt collection agency working on your behalf.

• State the current balance due.
• Referenced past communications about the debt.
• Set a firm deadline for payment.
• Explain briefly that failure to resolve the balance may result in the account being placed with your collection agency.

Often, customers take action once they realize the matter will be handed over to collections.

Do not let emotions drive your business decisions.

Many business owners, and operators feel guilty about the possibility of sending customers or patients to collections. Many others worry that they could lose future business because of their reputation.

However, the reality is that your customers or patients who are refusing to pay have already received something from your business and are currently damaging the relationship.

Diplomatic and cordial debt collections is simply another process your business uses to get customers to come to the table and meet their financial obligations.

It’s just business… as they say.

Partner with a collection agency before cash flow gets worse.

You may have waited far too long to get serious about collecting money.

It’s time to correct course and put a plan in place to make sure you can sustain positive cash flow.

Many businesses feel that accounts should remain in house until every possible effort has been exhausted. That’s not true.

Early placement of delinquent accounts often improves your recovery of past due invoices.

When you hire a professional collection agency with properly trained staff, proven communication strategies and effective systems, you’ll begin to see dramatic results and recover those unpaid balances.

Waiting any longer will rarely improve your chances of collecting the money that is owed to your business.

And worrying about cash flow day in and day out is causing you stress and eventually burnout.

Learn from this experience and build the proper systems.

The most difficult part of this process is coming to terms with the possibility you’ve waited too long to build the collection process.

But for many, we find the next hardest part is taking action. But that’s what needs to be done!

Every month that passes gives your overdue accounts more time to become uncollectible, while restricting your business’s cash flow. And because you have negative cash flow, that is causing you and your team to make difficult decisions which could be easily solved with better finances.

If you’re hesitating to use a collection agency because you’re uncomfortable with the risk of damaging customer relationships, consider what could happen to your business if you don’t act.

Your business deserves to be paid for the work you have already completed.

And your team is relying on you to build and grow a solid business.