Collecting payment for long outstanding receivables is frustrating for any small business owner.
Often times slow paying customers will do anything they can to further delay their payments, making running your business more difficult than it needs to be. Instead of letting customers hurt your business by holding onto the money they owe you, follow these steps to ensure that outstanding receivables get paid:
Friendly and Effective Tips for Collecting Payment
Set up a payment plan
Clients may want to pay, but may be in a cash flow crunch of their own. If they’re struggling, developing a payment plan can be the most effective way to ensure payment. By breaking up the payment by week or month, it is often easier for customers to handle and ensures that you get the money owed to you, even if it takes more time. (Learn how accounts receivable factoring can help with extending customer payment terms)
When talking to your customer that have not yet paid off their bills, it is important to maintain a calm, friendly, and level-headed attitude. Getting angry or overly aggressive will stifle communication and can often encourage a slow paying customer to delay payment even further.
Though being friendly is key, don’t be a push-over. Make sure that you are clear and consistent with your payment requests and don’t let difficult customers force you into a payment option that doesn’t work for your business. Remaining firm will earn your customer’s respect and likely speed up the collections process.
Send a letter
Start by notifying your customer about their outstanding receivables. Send them a friendly letter outlining the payment options. It will help to include an extra envelope so they can immediately send you their payment.
Make a phone call
If they have not responded to the letter or have still not paid off any of the outstanding receivables after 30 days, call the customer and figure out a compromise that helps them get you the money they owe. Letters can be easy to ignore but phone calls and voicemails, if necessary, should get their attention.
Take legal action
If all else fails and the customer won’t pay up, contact a lawyer and send a letter to the customer threatening legal action. If you are considering taking the customer to court, talk to your lawyer about the costs first to ensure you’ll still come out profitable.
Use a collection agency
If taking legal action is cost-prohibitive, selling your outstanding invoices to a collection agency can be good last resort is your customer still hasn’t paid. Though you won’t get full payment for the outstanding receivables, a collection agency can handle the time consuming process of tracking down your customer and collecting payment while you refocus on running your business.
And let’s not forget – accounts receivable factoring is a great way to combat the stress of slow-paying customers. By factoring accounts receivable, you’ll receive up to 98% of the invoice amount immediately.