As a small business, you may find yourself in a position where you’re actually providing finance to bigger, wealthier firms through their unpaid accounts. For a small business, an excessively high debtors’ value has a serious impact on cash flow. There have even been businesses that fail because their clients aren’t paying in time.
It would be best if you didn’t have to offer credit facilities at all, but if you are supplying retailers, they are going to expect account facilities or take their business elsewhere. A good strategy in this instance is to offer a substantial discount for COD payments and a smaller, but nevertheless considerable discount for payments within 30 days. It’s worth your while to do this since sending out statements and following up payments can be extremely frustrating and time-consuming.
Following Up On Payments
Just sending out statements and reminders isn’t going to get your tough nuts to pay up. No matter how little you like the idea, those collection calls are vital. No matter how frustrated and even angry you may be feeling about that overdue payment, you need to keep the client feeling positive about you and your business. No matter how great the temptation to call up at 2 a.m. and give him or her hell, you need to keep things calm and professional.
- Don’t call too often. When you call, try to get a time-bound commitment and only follow up if your client doesn’t live up to it.
- Call at a reasonable time of day. If you can’t get your decision-maker on the line, find out when you are most likely to reach them.
- Don’t let debtors make you lose your temper. If diplomacy isn’t your strong suit, get someone else to make those calls. You don’t get paid by antagonizing people – they’re more likely to make you wait even longer!
Tips to Help You Get Payment
- Check that the delivery and the documentation are correct. Your sales team should fulfill this role. It’s their job to ensure that the client is satisfied and that the invoice is correct.
- Have all the facts in front of you when you call. Before you call your client, ensure that you have all the documentation in front of you. That way, you’re ready to respond to any questions regarding the overdue invoice or invoices.
- Make sure you’re talking to the right person. Who authorizes payments in your client’s organization? Talking to the receptionist isn’t going to get you anywhere. If the payment is only a trifle late, the creditor’s clerk or book-keeper may be able to help you. For very late payments, you may need to speak to the owner or financial manager in person.
- Keep a pen and paper handy. Record what your client is saying about the overdue account. This will help you to schedule further follow ups if needed and will ensure that you won’t start at square one every time you call them.
- Remember that your company may be at fault. If your invoice is wrong and the client has been talking to your sales personnel about it, he or she isn’t going to be very happy with your service when you start demanding payment. It’s also possible that payment has been made and that there has been some error in recording it. If payment was recent, it may not be showing in your bank yet. At the same time, you don’t want to sound too hesitant. Tell your client that you see the payment is late and are wondering if there is some problem. Get them talking.
- Be courteous yet firm. Sounding cheerful and friendly can get your client on your side rather than feeling the need to respond defensively. No-one likes feeling like they’re under attack. Your debtor needs to feel that you want to understand their point of view, but don’t overdo it and lose sight of the aim of your call. Ultimately, what you want is a commitment to pay.
- Listen for reasons and excuses and determine how you can help. Let’s say that your client claims the paperwork has gone adrift. This may or may not be true, but you will react as if you accept the reason given and want to help. In this instance, you will ask who you should send the invoice to and how soon payment can be arranged if you do so.
- What to do if your client gets abusive. This is usually a bad sign. Your client probably doesn’t want to or can’t pay and is hoping you won’t want to talk to them again if they’re unpleasant. Alternatively, they’re just having a bad day. Ostensibly, you’re going to assume the latter. Without losing your cool, you’ll observe that the timing of your call may be bad and offer to call back later.
- Offer alternatives. What you really want is payment in full, but if your client really can’t pay, you need to look at alternatives. If you get your payment in a number of installments, that’s still better than not getting paid at all. Ensure that you record any and all commitments made by your client and that dates are specified.
- Wrap it up. Summarize the results of your call. How and when do you understand your client will be making payment? Ask them to send you proof of payment or to give you a call when the transaction has been completed.
- Keep it friendly and open all the way. No-one likes being handed over. Try to help your client avoid this and keep them feeling that you’re the kind of firm he or she wants to do business with. Check if they have explored other options such as getting a loan or find out how much they can afford to pay in monthly installments. Perhaps when times are better, your debtor will spend his cash on your business!
- Hand them over if you can’t get any co-operation. Last but not least, don’t let yourself become the fall guy for someone who really has no intention of paying. Hand them over for legal action if you have to. After all, you kept your end of the bargain!
Contact Seek Capital today for information about how to get startup business loans to launch the business of your dreams.
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