How to Avoid Collections & Get Delinquent Customers To Pay On Time
In every industry and every business, there will always be at least one delinquent debtor to handle. At times the missed payment can be a simple mistake or human error on the customer’s behalf. Those clients are quick to apologize and effectively pay what they owe because they want to maintain a good relationship with you and your business. Most business owners wish all debtors are this way; however, that is not always the case. There are those other times when a customer will avoid you on purpose in order to get out of paying. This is the scenario that happens more often than not. Their inability or unwillingness to pay bears heavy on your company, no matter the amount. Why? Because you want to avoid collections and get your customers to pay on time. We wish there was a simple button that you can click to receive the payment you are owed from every customer on the due date (or even early). In reality, it’s just not that simple.
Here is a recipe that you could implement into your business to help you avoid collections and get your customers to pay on time.
Start On The Right Foot with your client
If you are beginning a new relationship with a client, there are certain elements that can be put in place to avoid collections and get your customers to pay on time. We understand that every industry and business function differently but adding these aspects into your sales funnel can create a long-lasting, loyal and paying customer.
We recommend that you take the time to research your potential client before getting into business with them if possible. How do you go about doing that? Ask your trustworthy contacts if they know anything about your prospect, Google their name, or look on sites like the Better Business Bureau to see if there have been any complaints made against them. This is a great prevention technique.
If that prospect has passed your research examination, always have a written contract ready for them to sign. This contract should entail legal concerns such as: terms, payment schedule, preferred payment method, scope, late payment policy, and deadline(s). It is essential for you to get this in writing because with a contract you will be guaranteed a payment.
Going forward and depending on your industry, you can ask for a deposit in order to cover expenses or time that you may have already put into a project. These are simple ways to start off on the right foot in a new relationship in order to avoid collections and get your customer to pay on time in the future.
Steps To take with Your Current, Non-Paying Customers:
1. Accept Credit Cards & Write A Great Contract
It may not be right for you, but if it’s possible it can alleviate the burden of collections on you. Accepting credit cards means that collections are now on a third party – the credit card company. You may have to pay a small fee for accepting credit card payments; however, those are less than hiring an attorney or agency to collect payment from your customer. You’ll be able to focus on your business rather than running after those clients that are refusing to pay.
If you don’t have a contract in place with your current customers, do that now. As stated before, when you put the terms of your arrangement in writing you are guaranteed the agreed upon payment. It’s harder for a customer to flip-flop on your agreement when they’ve signed a contract.
2. The 2 “Checks”: Credit Check & References Check
Though these two steps may take a little money and time, it is ideal for those clients that have large sums to pay. In order to avoid collections and get your customer to pay on time, run a credit check and check references for those that are entering a long-term relationship or will have a larger bill. You can contact the client’s past business partners to see if there was an overall positive remark. Plus, you could ask about their track records with paying on time. These two aspects may not guarantee payment, but they can help you avoid future problematic clientele relationships.
If you are about to call a debt collection agency or an attorney to deal with a client that hasn’t paid yet, consider contacting the debtor first. They may have simply forgotten. When it comes to payment notices, being polite can go a long way. Steph’s Books can help you implement these steps into your business in order to avoid collections and get your customers to pay on time. We have more tips and tricks to make sure you are paid on time and in full. If you have any questions, give us a call today!