Debt collection, I am guessing is not one of the favorite parts of your job. You either see it as a necessary evil, or possibly avoid it altogether. You know that if you can get it right, it will benefit your business, but how do you make it work?
Well this Halloween, let’s look at some ideas – some “tricks” to make debt collection more effective, and some “treats” you can bring to your business.
To best the best results you must commit to a consistent effort to stay on top of your receivables and reaching out to delinquent customers. Your first step is to make one person manage the process. If you are an entrepreneur, you’re it! If you are lucky to have a qualified person, make certain that they are empowered to do the job. Create an environment that will enable them to succeed by communicating that their task is just as important as new business sales, customer service or daily operations.
One of the best things you can do involves what I call a “customer service approach to debt collection”. Shortly after you deliver your product or service, contact the customer to thank them for the business and ask if they are satisfied with the outcome. Use the opportunity to confirm their contact information, or to gather new information such as an email address. Ask them how they would like to receive their bill. Remind customer of how they can pay you: which credit cards you accept, where to mail check payment, or how they can make an online payment.
Your “customer service collection” call could also be an opportunity to offer to take the payment over the phone. You can offer a small discount for immediate payment. A discount of even a few percentage points can be surprisingly enticing to some people. Make sure your customer knows the discount applies only for a limited time.
Design a protocol for your in-house debt collection process that includes review of delinquent customers, and follow up with a collection letter and phone call. After your initial effort, if you are being ignored, or if a customer flatly refuses to pay, do not hesitate to cut your losses, and hire a debt collection agency to help you.
The benefits – or “treats” you can enjoy will be better cash flow, better customer communication, and if you can organize and stick to the process, you and your staff will spend less time chasing delinquent customers, and more time chasing new business.