Having an Collections strategy may be one of the most important determinate to the success of your business. The old debate about whether your brand should participate in using a 3 party is long over. We all know that Past Due Accounts is an important component to communicating your messaging effectively.
Merely having Collection accounts and having an ‘expert’ running them isn’t enough. In fact, it is actually detrimental to your business to have someone who is anything less than exceptional running your receivable strategy and daily management.
We at the Bentley Group are constantly amazed about how much money, time and brand equity are wasted by not enough attention to detail, the proper system(s) in place and utilizing the proper agency for large and small accounts because their in-house program is failing. Your accounting channels are the back-house of your business. They are the access point to who you are and what you do and often your chance to keep from going out of business. Make sure you put your best foot forward.
We have compiled 9 reasons your processes is failing at Getting Paid. We’ve also included 9 actionable ways to fix those problems.
1. Provide payment incentives in contracts, including discounts for customers who pay early and penalties for those who pay late.
2. Follow up with a text & e-mail. Studies show that text& e-mail messages yield a good response, even from debtors who don’t return phone calls.
3. Look into bill-collection technologies, such as software that makes automated reminder calls to overdue customers, plus services that send late-payment notices via e-mail.
Watch out for debtors who use "payment timing optimizing" to find out the difference between your stated credit terms and your real terms. Translation: They want to know how late they can pay without being labeled a credit risk.
4. Keep collection letters short and professional. Avoid the clutter of too much print so the important data stand out. Enclose a stamped, self-addressed envelope. Letters that sound personal work better; handwritten notes work best. Use a P.S. to present your strongest points.
5. Keep communications fact-oriented. Surprise, disappointment and irritation are all inappropriate. It’s equally ineffective to take an apologetic tone. The customer promised to pay by a certain date, so simply ask for payment. Make each letter increasingly forceful, but avoid "toothless" threats.
6. Focus on how it will affect them. Collection letter recipients pay more attention to letters that involve their point of view. Play up the impact of nonpayment on their credit history and business relationships. Call customers who owe money before you fill their next order.
7. Keep credit standards tight, even for friends and good customers. This year, 42 percent of credit and collection managers tightened credit.
8. Use your best employee to make the call. Ask employees with the most collection experience and skill to handle the largest overdue accounts.
9. Keep the customer sold on your company, even if you’re turning down his or her request for additional credit. Before stating your refusal, justify your reason from the reader’s point of view. When possible, end with a counter proposal.
The fix: Put yourself in they’ shoes, make sure each action adds value. If it doesn’t add value don’t do it.
5 days overdue: Send invoice stamped "Past Due."
15 days overdue: Send first letter requesting immediate payment.
30 days overdue: Send second letter demanding payment.
40 days overdue: Follow up letter with phone call—or make personal visit to customer—to find out why payment is late. Agree on a time when a payment will be made, or negotiate installments.
45 days overdue:If the above steps don’t work, send third letter demanding payment on a seriously delinquent account.
55 days overdue: Follow up letter with phone call stating that customers must pay by a certain date. Emphasize serious consequences of further delay. If necessary, offer alternative payment terms.
The fix: (AFTER 55 DAYS) (NOTE: IF THERE IS NO PERSONAL GUARANTEE IS IN PLACE, FROM OUR 30+YRS. EXP. PLACE THEM WITH OUR AGENCY FOR 10 DAY'S
60 days overdue: Continue efforts to work with customer to settle account.
75 days overdue: If all efforts fail, write fourth and final letter informing customer that you will take action to collect by a specific date.
90 days overdue: Follow through on action described in the letter.
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