Collecting Your Bills: Getting Customers to Pay Up

Often the biggest challenge for a small business isn’t knowing the market, providing the right product or delivering exceptional service – it’s getting paid on time. Managing accounts receivable is the responsibility of every successful business, but it doesn’t mean going to the dark side of collection.

Following the “Six Ps” of debt satisfaction can help minimize frustration, keep your cash flowing and develop business relationships that provide mutual growth.

Policy: Every business needs a collection policy. “Our policy begins by determining whom we will do business with and whom we will not,” explains Dan Hansen, vice president of Action Print in West Des Moines, Iowa. “Before we open an account, we check references, banking information, reports from other suppliers, legal filings and media reports. Without fail.”

From there, a collection policy should spell out to customers and to your sales and management team how your business handles overdue accounts. The policy should include a timeline and actions taken, such as calls, letters and potential use of a collection agency. For every business, this should be a clearly marked trail designed to keep customers from falling away.

Process: Use an accounting process that allows for payment tracking and monitoring. This necessary element of discipline should be consistent with your collection policy, timeline and action. In today’s tech-savvy culture, you can even choose software that can adapt your accounting process to the customer’s schedule. Know whether a good customer pays at mid-month or at the end of the month.

Punctuality: Communicate quickly, even right after the sale. This is a good way to detect possible problems, objections and excuses that may lead to late payments. Delays in contacting customers can allow issues to build and increase collection difficulties.

“We stay on top of our accounts,” says Hansen. “We communicate with them and don’t let them get too far out. We ask questions to make sure we’re on the same page regarding the account. Our sales staff is a key part of our communication team. Their personal knowledge and connection with customers can lead to creative solutions, the kind of win-win strategy that allows us to keep accounts over the long term.”

Persistence: E-mails are certainly a part of today’s business practices. They are direct, but can become part of computer clutter. Combine e-mails with faxes, phone calls, regular mail and personal visits.

Persuasion: Be gentle at first, then increase your insistence and assertiveness. Small businesses rely on close relationships. So get to know the bill payers. When people know you value them, it can help reduce misunderstandings. It’s also helpful to know someone higher up in the organization if you need to negotiate further.

Prioritize: Don’t allow your business to place a low priority on collection of overdues. Find out what’s causing late payments. Have account representatives handle customer-satisfaction issues and make sure someone in your business is trained and empowered to handle financial negotiation or payment plans.

Following the “Six Ps” is your best chance to avoid turning your business into a full-time collection agency. Let your debt collection strategy keep customers happy. But also let them know it’s in their own best interests to keep you and your business happy.

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