The Check’s in the Mail: An Action Plan for Late Paying Customers

Dealing with late payments is an all-too-common problem for small businesses. However, having a plan of action in place will help you be more successful collecting from customers and will signal that you cannot be easily pushed around.

Here is a plan of action for the five most common late payment situations or excuses:

When They Say the Check Is in the Mail

While the U.S. Postal Service does not publish its statistics on lost mail, Consumer Reports gave the USPS a score of 90 percent for successful delivery nationwide. In other words, although the payment could have been lost in the post, there is a good chance this may just be an excuse.

WHAT TO DO: When making a credit collection call, ask questions first. When and where was the payment sent? Was it sent via certified or first class mail? If the customer claims the check was posted more than a few days ago, it was either lost or never sent. Ask the customer to cancel the check and send another one via certified mail with a tracking number. At the end of your call, make sure to clarify that a follow-up call will ensue within the next two days if payment is not received

If you don’t want to run into this credit collection issue again, try to set up a direct debit agreement, in which the customer simply posts the payment right into a bank account. Otherwise, provide your customers with self-addressed envelopes to get your message across.

When They Say They Pay on Their Own Schedule

You require collection in 30 days, but your customers tell you they pay on a 60-day schedule. Your credit collection call may require you to explain that the terms of payment are based on the seller’s conditions. To put it bluntly, you get to choose when you are paid, and they agreed to that choice when they made their purchase.

WHAT TO DO: The best way to avoid having to deal with this situation is to be proactive and prompt when you make your initial sale. But if you find yourself dealing with this excuse, being thorough and detailed will help you come out on top.

To prepare for this collection call, pull out any relevant invoices, which should have the conditions of sale printed directly on them. Reiterate the date on the invoice, the stated payment schedule, the outstanding balance, and how many days the customer is overdue. You might need to have the salesperson on hand to confirm that the conditions of the sale were clear.

Also, always include your Terms of Agreement on your credit application, include the payment due date on every invoice. And in the future, to prevent this type of misunderstanding during a credit collection call, bill your customer right away and follow-up as soon as possible–even before the bill is due. Try offering incentives for paying early to avoid conflict when the bill is not on time.

When They Defer Responsibility for Payment

Even if the accountants or auditors have the books, they are likely not holding the money. You will more likely hear this kind of excuse from medium to large-sized customers.

WHAT TO DO: During this collection call, try to engage the customer in a conversation where you find out how they’re able to operate daily without their books. Chances are this line of inquiry will poke holes into their excuse. However, be sure not to harass or hound the customer with suspicion, as that will aggravate the customer, not to mention violate the Fair Debt Collection Practices Act.

Stay polite and inquisitive as you ask the customer for their accountant’s contact information, as a step moving forward in the credit collection process. Finally, do not end the collection call without another confirmation of payment. Look up emails for other contacts at the company and alert more individuals to the problem. Chances are, you’ll be able to find at least one responsible person who will make sure the issue gets resolved.

When the Company Is Going Out of Business

This is a particularly worrisome credit collection excuse, and you must go to every length to confirm the story.

WHAT TO DO: If possible, speak with the company owner or manager and try to find out how far along the liquidation has progressed. Express sympathy while attempting to secure your payment. Find out the identity and contact information of the liquidator, and make an effort with both the customer and liquidator to ensure your claim is fulfilled.

When They Are Waiting to Get Paid Themselves

Small businesses frequently run into cash flow or late payment troubles, but the point is you and the customer are in the same boat, and paying you is the right thing to do.

WHAT TO DO: Explain that you understand the absolute necessity of customer payment, which is why you are calling right now. In the course of the credit collection, reiterate that you cannot function as a bank. Go over your credit terms again, articulate the amount and length of time overdue, then expressly state that you are seeking payment.

One strategy that is often effective in this type of situation is to offer payment installment options. If your customer can’t pay back the full amount, tell them to start paying in installments. If you are comfortable, say you are willing to divide the outstanding amount into multiple installments if your customer is willing to pay that way. This strategy is widely used by big companies, debt buyers, collection agencies, and other lenders. Helping your customer pay you back will usually help you get paid.

The post The Check’s in the Mail: An Action Plan for Late Paying Customers appeared first on AllBusiness.com

The post The Check’s in the Mail: An Action Plan for Late Paying Customers appeared first on AllBusiness.com.