Delinquent customers can drain time and energy from your business if you spend time chasing them for payment. They take time that should be spent to managing and growing your business. The process of recovering money owed to you can be demoralizing and frustrating, but it must be done. So how can you get the best results in the most efficient way? Which tricks and tools are going to make delinquent customers finally pay you?
Communication – You should never stop communicating with delinquent customers. Your contract and bills are the first ways you communicate with customers. With delinquent customers, the squeaky wheel will get the grease. Your first step is to get on the phone and see what is happening. You would be surprised how one phone call will get results with some customers. Use the phone call as a sort of customer satisfaction survey as well as a request for payment.
A collection letter should be sent to any customer delinquent more than thirty days. If you draft a powerful letter you will use it again and again. You do not need to be threatening, simply state your demand for payment.
If someone in your company has a relationship with the delinquent customer, make sure to involve them in the process, perhaps to make a second follow-up call and create a sense of escalating urgency.
Leverage: Do you have a product of service that the delinquent customer wants again? If you have leverage, use it. Sometimes your leverage is seasonal: fuel oil dealers get paid as soon as it gets cold. Pediatricians get paid when parents need their camp or school physicals. Trade contractors can use mechanic liens to secure payment, if they do so in accordance with state laws.
A perfect example of using leverage to get paid is in the first Ghostbusters movie. A hotel is overrun by ghosts and customers are scared. It is bad for business. The Ghostbusters are called and capture the ghost. They present a very large bill to the customer, a very haughty gentleman who tells them their bill is exorbitant, and refuses to pay. Without skipping a beat, the Ghostbusters start to release the ghost back into the hotel ballroom. Not surprisingly, the snooty hotel manager agrees to pay.
While you may not want to be as aggressive as the Ghostbusters, find a way, if you can to use leverage to get paid. Stop providing the product or service, if you can – that is leverage. Hopefully, your customer contract allows you to accrue interest. Finance charges and late fees are a great leverage, and can also be used as a negotiating tool. Offer to waive interest charges if the balance is paid in full. If your customer cannot pay the entire bill, set up a payment plan that includes waiving of interest at the end of the plan if payments are made on time.
Flexibility – In addition to waiving of finance charges and fees, be flexible with your delinquent customers. Offer payment terms and provide multiple ways for customers to pay you. Be creative. Offer a small discount as a last-ditch effort. A small discount will be less than you pay an attorney or collection agency if you outsource the debt collection.
So keep talking, keep thinking and keep improvising – and you will find many more delinquent customers will come around.