Find ways to get customers to pay faster.
It’s not uncommon for a business to focus more on sales and getting new customers than on collecting money from those customers. As long as cash flow is good, the owner/manager assumes the customers will pay at some point. However, statistics show that the longer a customer waits to pay a bill, the less likely they are to pay off the account. Here are three tips to help your business improve collections on past due accounts.
1. Make Collections a Priority
If you don’t have an employee dedicated to working on past due accounts, you might need to hire one. You need someone who is focused on getting those past due payments and keeping everyone up to date.
If you have one account manager or even worse, you try to do the task yourself, it’s likely that those accounts which haven’t been paid in a timely manner get minimal attention or pushed to the side completely. On the other hand, when you have a person who makes that their main job, you’ll see better results.
Part of making collections a priority in your business is developing processes that are effective. This may start with your payment policy and include late charges and other actions when a customer doesn’t pay. Once you have a solid payment policy in place and collections procedures, your staff can implement the tasks to ensure you receive payment faster.
2. Offer Discounts
To encourage customers with timely payment, consider offering a discount or other reward. Most people respond to positive reinforcement, and a discount is often an effective way to ensure timely payment. You can give a five or ten percent discount if the account is paid within 30 days.
People like to save money, and the idea of a discount encourages them to make payment of the account a priority in their minds. You must decide how much of a discount you can afford and still make money.
When it comes to rewards, you can offer something for free once the customer pays the bill. Perhaps a free service will entice them to pay their account and even encourage them to come back to your business in the future. You may want to experiment with different ideas to see what works best for your company.
3. Set Up Payment Plans with Past Due Accounts
Most customers don’t intend to skip out on paying a bill. Something comes up unexpectedly and they can’t afford the payment in their budget. They put off paying it, thinking they will have more money later. Unfortunately, something else always seems to come up and they just don’t have the money for your business.
You can increase the likelihood that a customer will pay what they owe if you can provide them with a payment plan. For instance, offer to accept equal payments for the next six months until the debt is paid. You can allow interest to accrue to make it worth the wait while enabling the customer to afford the payments. Make any future sales or services dependent on payment up front until the account is settled.
Either offer one or two solutions to help your customers get caught up on what they owe or ask them how much they can afford to pay each month. Make the terms reasonable but expectations clear so they know how serious it is to agree to a payment plan.
Whether you are a business with a B2C or B2B focus, you need to find ways to improve your collections. In the interim, you can get a small business loan to help you pay your bills on time while you wait for payment on your accounts.
While many times, late payments and past due accounts happen with individual customers, you may also find other companies struggling to pay on time. Whether you are a business with a B2C or B2B focus, you need to find ways to improve your collections. In the interim, you can get a small business loan to help you pay your bills on time while you wait for payment on your accounts. The loan allows you to continue operating as you work to improve your collections.
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