Many a time, business owners face the problem of customers not paying up the amount for goods sold. Phone calls, reminder letters, etc., are of no use as the customer is in dire financial conditions. In such a case, you can't wait indefinitely to receive the money; this is where debt collection comes into play. It's a very tedious and long drawn process, especially in case of business-to-business debt. Hence, it needs to be tackled with great care, as you don't want to lose the customer. It's not that they don't understand the importance of paying up, it's just that they could be in some kind of financial trouble. Moreover, there are several laws which punish malpractices in debt collection, so you need to be careful of that as well.
For Small Businesses
Small business owners find it quite challenging to collect money from their customers. But with some preparation and homework, late payments can be minimized, besides you will also know when to refer a customer to collections. You need to communicate with these debtors effectively and work with them, in their times of financial need, and who knows, they may become your lifetime clients. People who pay late can be categorized into three types - those who would like to pay but are unable to do so, those who intentionally delay so that they can simultaneously deal with several payments, and those who avoid payments intentionally.
The first two types of people genuinely want to pay, so you need to work with them and convince them to make a full or part payment. It's important that you recognize the third category soon enough and take appropriate action including turning their accounts to a collection agency.
One rule of thumb which you should always apply is that you need to continuously communicate with your customers, till the time you are paid. Keep sending them the bills and re-bill them every month. It's not necessary for you to wait till the month-end, instead make sure that you send notices whenever an amount is overdue.
There are several important points which you should remember while going for debt collection. The first and the most important point is that you should never be rude and you must never seem to be harassing your customers. You need to make them aware that you are pursuing their case. Never call them more than once a day. Moreover, never ever threaten the person who owes you money or state anything which leaves a bad taste.
It's important that you are direct in whatever you say. You need to also listen to what the customer has to say and make sure you never get personal with him. Your goal is not only to make the customer pay, but to retain him as well. So you should never make a call seem to be personally degrading and demeaning. The trick here is to remain calm, but maintain a sense of urgency.
If you find that a customer has a financial problem and is speaking the truth, then you can try and negotiate for the amount he or she can pay. You can consider an extended payment period, if the debtor agrees to make the payment by that time. Besides making phone calls, you can also send letters, so that you convey a sense of urgency. Make sure you save copies of correspondence which you have had with the customer. You can also opt to offer a discount so that you are able to recover some amount instead of losing all. You can do this if the amount accumulated is large enough and is not paid over a long duration.
Hence, there are several ways to recover your dues. But while making a call or sending a letter, make sure that you are polite and have an emphatic attitude so that you seem to care for the customer.