Are you holding on to your past due accounts hoping that customers are going to come to their senses and pay you? How long do you normally wait to receive payment?We advocate waiting only 90 days before taking action, but we realize that there are many reasons to wait a bit longer. If customers are talking to (not ignoring!) you and if you believe that is a real possibility they will make good on payment AND if you are willing to wait because you wish to keep them as a customer, that is one thing. An active decision to extend credit a bit longer can be a good business practice in the long run. However, too often we see our customers simply being too busy to keep track of their receivables, and the pile of money owed to them grows by leaps and bounds. Some customers are uncomfortable asking for their money. Passive “decisions” to delay collecting money owed to you can cost you dearly. Here are some things to consider:
1. Perception – If customers owe you, chances are they owe others as well. Do you want to become the creditor that they don’t pay because you are not asking for your money? (The squeaky wheel and all!).
I recently received a large receivable from 2010 for collection. When I contacted the owner of the company to collect it, his initial reaction was, “Where have they been for 4 years?” Although the debt was still well within the statute of limitations and very collectible, the perception on the part of the debtor company was that it was not important enough to the creditor to warrant paying. Our intervention made it an urgent item, and they are now in a payment arrangement.
2. Liquidation – Companies go out of business every day. They also sell assets and relocate. The same is true, perhaps more so, for consumers. If you wait too long to pursue money owed to you, you run the risk that there will be nothing to get when you decide it is time to take action!
3. Prove It! – Imagine this: A customer owes you money but you decide to wait a few years, and then finally pursue it. They dispute receiving the product/service, or dispute the quality of the service, even thought they have never complained before. To collect your money, you have to respond to their dispute. How good are your records? You may still have the invoice, but not the background information. Some disputes requires an individual’s personal recollection of the circumstances, which if not detailed in writing at the time of service, may be lost forever. We see this type of thing happen all the time.
4. Increased Cost of Collection – The longer you wait. the greater the chance that your collection agency will charge you a higher fee to collect it.
These soft costs of delay are very real. Can you afford to wait?