Whether you are the proud owner of your own business, or just personally managing one, the experience of having to deal with unpaid accounts and overdue invoices is surely something you have already experienced at some point. If you have not been through this ordeal yet, it is important that you understand what you should do in order to properly deal with the challenge.
Delayed payments on accounts and transactions are likely to take a toll on the business, regardless of how successful it is. The experience is doubly frustrating on the owner or manager, as he or she sees the cash flow of the business start to dry up due to uncollected dues with necessary payables hovering on the horizon.
We spoke to Scott from JMA Credit Control, a leading debt collection agency in Melbourne about how you can manage it.
Prevention Is Better Than Cure
If possible, the best way to deal with having overdue accounts is to avoid their existence in the first place. There are several systemized and professionally-organized collection processes that you can use to ensure that your profit is protected through a swift accumulation of payments. Signing up for professional collection services are more often than not well worth the extra payment, as the reduction of overdue accounts will surely offset the investment made on the service.
At the same time, having a professional collection agency process late payments for your business will help you focus more on other facets of management. You will have more time on your hands to focus on developing your other resources instead of personally chasing after lost payments yourself. This way, you and the collection service can both guarantee that the cash flow of the business remains steady, lessening any risk of losing the business due to non-paying dues.
Ideally, every business can afford to pay for professional collection services, but unfortunately, that is not the case in the real world. A lot of people enter start-up businesses and found their own corporations on a fixed budget, with little to no room for extra services that they could technically do themselves. Although this restriction makes managing the business more difficult, it is not impossible to do so. As such, here are a few tips to try if you wish to manage overdue accounts without the help of a paid collection agency.
Ask For Advance Payments
The first thing you can do to avoid overdue accounts is to try asking clients to pay you in advance. It doesn’t even have to be paid in full, although ideally, that is what you should be targeting. Otherwise, explore partial payment options with the client. You can try to offer special promos like small discounts or additional credits for customers who opt to pay in advance, as these little benefits can significantly help market your business and encourage the practice in the long run.
When negotiating with customers for advance payments, always make sure that you do not sound demanding or forceful. After all, you are trying to ask the client for a favor in trust, not the other way around. Try to explain to your client how to advance payments would be beneficial to both him or her and the business, and make sure to justify your payment terms by discussing them upfront. Encourage questions from the client to make sure that healthy discussion is provided, as good communication is known to close deals well.
Set A Reminder System For Payments
If you cannot convince clients to sign up for advance or even upfront payments for your business, the next best thing would be to implement a collection process that will ensure dues are paid on time. A friendly reminder system should be a good start, you can send clients a reminder through electronic mail or text at least three to five days before their due date comes up. This gives them enough time to remember and prepare to set the correct amount needed for collection.
If ever the due date has come up and you still have not received a response from the customer, a friendly call would be fine as a secondary reminder. Do not call right after the due date, however, but allow at least a week or two before you pick up the phone. Once the customer picks up, start on a friendly tone and gently remind him or her about the late payment. Understand that everyone is also living under different circumstances in life, and not everything can be explained in one simple phone call.
Try to learn why the payment is late and arrange a payment situation with the client if necessary. The goal is to be able to collect the full payment, as it is better to receive them late than never. Having facilities for taking credit card payments are extra helpful in these situations, as it allows the customer to gradually pay for what they owe while your business gets the certainty of receiving payment. Make sure that whatever settlement you make with the client, a healthy relationship is preserved between the two of you. It strengthens customer loyalty while also helping ensure that your business retains clients.
If ever the due payment is late for more than 90 days already, that might be the time to consider passing the account to a professional collection service.