Debt collection and customer retention are not mutually exclusive. It is possible to manage delinquent customers if you have a consistent plan. Small business owners work really hard to gain new business. Every new relationship begins with the expectation of payment, so when payment is not received, it feels like betrayal. How do you juggle your need to be paid with the need to grow your business and retain customers? Is there a way to collect money owed to you and protect, even salvage your client relationship?

Sure there is. You must commit to a consistent plan:

• Start every relationship off the right way with a good contract that outlines all payment terms and the consequences of non-payment. Customer contract do not come from lack of trust. Putting the details of your business relationship in writing, and having both parties agree is NOT a negative way to begin a business relationship. In fact, it is a great way to make sure all parties are on the same page from the start. Great relationships begin with great communication.
• Know your customers and how they pay. Do not give the same terms to all credit customers. You may give your largest or most promising clients more credit than others. With other customers who may be slow payers, ask for a down payment before extending credit.
• Every month, review your accounts receivables and follow up with them diligently. Polite reminder phone calls and well crafted collection letters can work wonders.
• Perform “triage” on all customers over 90 days past due. Make two piles: customers you are willing to ride it out with a little longer and those that need to be sent immediately for outside collection. There is a big difference between a client who responds to your calls and asks for a little more time and a customer who totally ignores you or flat out refuses to pay. Decide which customers you wish to keep and wish you no longer wish to have as customers.
• Make them an offer they cannot refuse! Find creative ways to offer new product if the old balance is paid in full. For example, if your customer owes you for three months, offer 3 additional months at a discounted cost if the original 3 months are paid in full. Consider a small discount of say, 10% for payment in full. A small discount will be less you will pay a collection agency, and might just do the job. However, make sure you communicate in writing that your offer is only available for a limited time, and will be withdrawn on a certain date.
• For customers you wish to send for outside debt collection, decide which customers (if any) you would take back once their bill is satisfied. Let your collection agency know as they may be able to use the information to get the bill paid. We strongly recommend not providing new services to accounts that have been sent for outside collection until balances are paid in full.

In the end, it all comes down to communication with your customers and a consistent plan for tracking the money owed to you. Good customers will appreciate your discipline and fairness, and those who do not work with you may not be worth your time for the long term.