With the current financial markets, the uncertainty involved in our political arena, and technology that seems to change daily, we have almost become a transient society. With smart phones, people are anywhere, and can work from that same place. People conduct business both in person and online. Some businesses rely on a personal relationship for continued business, while others never meet their customers.
However, for all businesses customer communication is an essential and effective tool to cut down on slow-paying or delinquent customers.
Twice this week, a colleague has told me that they have improved their cash flow simply by calling customers and speaking with them. Radical concept, right?
The most important aspect of credit management is communicating with the people who owe you money. Call the customer right after your finish the job. Make certain you have the right contact information, and ask your customer how they would like to receive your bill. Often invoices go unpaid because the person who ordered the work never gets the invoice to the person authorized to pay. This first call is also the perfect time to make sure the customer is happy with your product or service. If there is an issue, you can cut it off long before it becomes a problem. You must listen to signs that give you indication of a problem. There are all sorts of signs and signals you get, and can get, if your system is set up to handle this vital information. So often we see an invoice and no contact with the account for sometimes years. It almost seems as if some business owners rely solely on hope that all customers will pay. That rarely ends well!
A regular review of 30-60-90-over120 day accounts receivable aging is an opportunity to communicate with customers. With a current column, you can see at a glance, how much the business did in the current period, and which customers are problems. Use these markers (30/60/90) to communicate with a collection letter and follow up phone calls or emails.
You may find that you have an opportunity to sell more service or close out other current invoices when you talk to the customer. For example, payment of a past due invoice for one month of service could be rolled into a discounted prepaid 6 month package. Or, payment of a delinquent bill could be combined with a small discount on a current bill. Think of it this way – if you send a file to a collection agency or attorney, there will be a fee involved. Why not offer a small, “limited time offer” discount that is less than you would pay if you hire a collection agency?
Even when you are not talking about invoices, continue conversations with your customers. Ask them how they would like to pay you. Does an online payment portal make sense? Make sure your invoices have the terms clearly printed on them, advising your customers when you expect to get paid. A contract, even an informal one is also invaluable.
Remember, a customer still wants something from you. They want to use the credit you extend because it is good for their finances. You as the creditor then assume the responsibility of its management. Credit will not manage itself. Each individual account must be an integral part of the whole, and understood as the individual it is.
