All customers are prone to falling behind on bills and payments. As a business owner, this is a possibility that you may have to accept, especially since humans are prone to frailties. Unfortunately, late payments can pose a problem to most businesses as it could also potentially delay your firm’s own payment to suppliers and cut your cash flow needed to sustain daily operations. Imagine being unable to pay your loans and accruing more debt due to high interest! Besides, failing to collect payments from past due accounts can lead to severe losses, which could eventually compound and force you to shut your doors.
Truthfully, running after people who owe you a sum is not an easy task to do. However, with fast action, firm guidelines, and a friendly disposition, you can easily collect any customer’s late payments without sacrificing your client-merchant relationship. To find out how you can resolve customer’s past due accounts without completely alienating your clients and severing your relationship, read on.
1. Start with a Proper Billing Scheme in Place
The billing process begins the moment you cut a deal with your client. As such, it is important to discuss your payment guidelines as soon as possible. Inform your client ahead of the possible penalties they may incur from late payments and other essential information. Doing so will set the expectations of both you and your client regarding payment dues and due dates. This way, if your client pays late, you may gently remind them of the payment guidelines you’ve discussed once before.
2. Manage Accounts Receivables Properly
To properly resolve past dues, you, as the business owner, must work to constantly update and properly manage your Accounts Receivables. Having a management app will help you keep track of all pending payments. Utilize scheduling and calendar tools as well to remind you of the invoices that need to be sent. Even good old pen and paper works well in ensuring you don’t miss out on any pending payments. Avoid unnecessary mistakes by being vigilant.
3. Send Invoices as Soon as Possible
More often than not, late payments on the part of the customer are caused by simply forgetting. After all, life can get pretty hectic, and most people forget things when they’re busy. In order to remedy this situation, send your invoice early on so they can pencil it in. Reminding your clients early will allow them to pay out with less incurred penalties. Most importantly, this will allow you to continue your business flow seamlessly. Don’t be afraid to send a follow-up notice, and make sure you have a payment method indicated so they can readily pay using the proper payment portal.
4. Give It a Personal Touch
Most past due account emails come off as unfriendly because they are essentially written by a robot! You don’t necessarily have to write a bespoke email for each client. However, having a few emails in your arsenal, written in a cordial but stern manner, is necessary. Instead of using closing remarks that read “From Management,” indicate your branch manager or CEO’s name and their position. Doing so makes the interaction feel more personal as the client will see that he/she is corresponding with a real person. Writing down the sender’s position will also apply subtle pressure on your customer to pay their dues.
5. Be Persistent and Consistent in Sending Out Reminders
If you are having trouble with certain customers, don’t stop reminding them. You don’t have to be aggressive in sending messages or calling. Simply contact your client and politely remind them of their past due accounts and the penalties that go along with them. Reiterate that you may be forced to cut certain services if they cannot comply. Remind them you’re willing to work with them so they can find a way to pay you back.
6. Set Up a Reasonable Payment Plan
If your client is paying late due to cash flow issues, consider setting up a payment plan that allows your client to repay in installments. Negotiate the frequency of payments and the amount that the client can afford to pay at each increment. Moreover, it is important to be transparent and discuss the repercussions of late payments, including late fees or being temporarily withheld from buying your products or services.
Final Wrap Up
There are many kinds of clients. Some pay on time, others a little late, and some take a lifetime. Needless to say, the collection of payments is not an easy task and requires not only management and organizational skills but social skills and empathy as well. Follow these tips to effectively collect past due accounts without losing your clients. If you want additional guidance, consider contacting an accountant. They can help you determine the best payment scheme and evaluate which delinquent clients you may just have to forgo so you can cut your losses. Call us for a free 30-minute consultation if you need help.
