Coping with ever-increasing costs is one thing – ensuring you get all the money that’s due you from your clientele is quite another. We’ve all experienced non-paying and slow-paying customers somewhere along the line and when it’s money we’ve really been counting on, it’s hard to accept the financial loss.
Here are some credit and collection strategies showcased in our consultations:
Set Established Payment Guidelines: To avoid problems in the first place, establish ground rules for how payment must be made and stick to them. On your order form, brochure or website, clearly clarify your terms of sale and payment options. Also have set guidelines for how you will handle checks and credit cards.
Get It in Writing: Be certain your contractual agreement or other formal agreements divulge what your payment expectations are and the consequences for late payments or non-payment. When you review the contract with your client, be sure they initial the payment policy section. This way they can’t say you didn’t tell me or I didn’t understand; your documentation will assist you in supporting your claim in the event the account escalates to litigation.
Limit amounts due from new accounts by requiring monthly or phased payments for contractual or ongoing services. If a project is ongoing, this is prearranged as part of the contractual agreement. Submit itemized bills on the month’s work (or regarding completion of the phase of a project). If payment is not received within the specified period of time; you have the option to interrupt service pending payment in full. For this to work effectively, create phases of the work with an accountability aspect to which both parties can agree before the project is commenced. Specifically chart time and progress invested on a daily basis; each billing should include a brief progress report, projections and recommendations.
Send a Series of Reminders: In most cases persistence pays off; call or send notices to delinquent clients on a regular basis; always inquire about their experience with your company with questions that require a positive response – prompt for “yes answers.” (Example: Hi John, this is Julia from XYZ Inc. Did you receive our invoice with your delivery on Friday?) If the response is yes continue your dialogue by affirming you are following up to alert them the invoice was due last Monday.
Evaluate the Situation – Offer Options: It’s important to evaluate the integrity of your clientele; this is not always easy to do but experience says to give the client the benefit of the doubt in the beginning stages. If the client is overdue by a small margin, say a week, give them some time. To avoid allowing the account to remain overdue for weeks, or even months, you must begin the collections process early on. Sometimes simply offering to break up the payments into two or three weekly installments can be the difference between getting paid and going to court. Statistics reveal that companies who initiate informal debt collection effort from the start experience a significant increase in recovery.
Be Persistent: The challenge – sticking to your guns and demanding payment. Hard luck stories and the natural tendency to rescue others can temp some creditors to back off and allow the client some time to pay… Sound familiar? It may seem awkward at first to be persistent but the results will be far more rewarding than if you chose to concede.
In the service emporium, it is common practice to do the work first and bill later, which often leads to collection issues; in these circumstances it will behoove you to have a formal agreement that stipulates precisely what your payment expectations are and the consequences for noncompliance.
Be Willing to Sue: You must be prepared to draw the line and hold delinquent clients accountable for their financial obligations. Sometimes a few well-chosen words in the form of a collection notice or phone correspondence can be the difference between being paid and going to court. If your in-house efforts prove fruitless, enlist your attorney to write a formal demand for payment as a “last notice” prior to pursuing litigation.
Know When to Quit: If your client is clearly eluding payment and evidence reveals they are not financially able to pay in full; before writing the account off completely, contact the client with a settlement offer. Sometimes it’s better to get something as opposed to nothing at all; particularly on small balances. This may seem a little unmerited but keep in mind that even if you pursue small claims and a judgment is awarded in your favor, it’s still your responsibility to collect – the courts do not enforce judgments. You must determine if the balance warrants the time involved to assertively pursue recovery efforts.
