Eradicating Collections Problems

You’ve gotten rid of their pests, but now have to become the one to collect the money owed your company. The sense of urgency your customer felt (before you rid their home of ants and roaches) has turned to complacency with regard to your bill.

With your fiscal year-end fast approaching, your own sense of urgency mounts. Reluctant to alienate an important customer, you play their payment waiting game while getting increasingly resentful, cash-strapped and worried that year-end will leave too many account issues unresolved.

Rather than resorting to strong-arm tactics or sitting back and hoping your customers will somehow have a change of heart, try turning the dilemma to your advantage.

Alert your customers to the fact your fiscal year-end is coming up and the need to collect outstanding debts has taken on an added importance. Commercial customers can especially appreciate this requirement. Whether your business operates on a calendar fiscal year or some other timetable, even residential customers can relate to your position when explained in the context of "tax preparation." You might even try a little humor, laying the blame (in a lighthearted way) on your accountant’s constant nagging!

Make a special appeal for your customers’ help and cooperation in meeting your goal of closing the books on time. Many people who react negatively to payment "demands" are more than eager to respond to a "call for help."

HELPFUL HINTS. Here are some tips to help you collect accounts receivable.

1. Think of collections as sales. In most cases, your customer intends to pay — sometime. It is your job to persuade the customer to pay sooner than later and before they pay anyone else. The skill in persuading customers to pay up is like the skill that the sales force uses in persuading customers to buy from you in the first place. If you think of your job as a sales job, the rest of your work fits in quite easily. You are selling the peace of mind, the self-respect, the clear conscience and friendship received in return for payment of amounts owed.

There is one big difference, however, between collections and sales — a difference that gives you a big advantage. In sales, a case often can be made for not buying from your company (postponing the service, buying from a competitor or not buying at all). Not so with collections. Here, it’s a done deal.

A customer has purchased your services and paying for them is the only correct and proper option (aside from the case where there is a problem or a mistake has been made).

2. Put your company at the top of the list. The person in charge of accounts payable (whether a corporate client or a residential customer) likely receives several invoices and statements every month. It isn’t the debtor you are competing with for money, it’s all the other companies with whom your customer does business and to whom they owe payments.

How can you make your company stand out from the pack? By being the "squeaky wheel"? That may get you paid, but it certainly won’t endear you to your customers and it may motivate them to look for another supplier.

Instead, try a positive approach. Shift your thinking from a transaction-based business to a relationship-based business. Get acquainted with the people with whom you’re dealing. Sales professionals practice the principle that "people like to do business with people they like." The same holds true for post-sale business matters.

So, go beyond "Hi, how are you?" Show a personal interest and concern by asking about family, hobbies, hometowns…you get the idea. You may find it personally — as well as financially — rewarding.

3. Make it easy for your customers to pay you. A lack of payment options combined with a big balance may lead some customers to ignore your invoice in an attempt to avoid a conflict. Offering alternative payment plans can be an effective tactic for reducing stress (for you and your customers), bringing overdue accounts up to date and improving cash flow.

For example, suggest the use of a credit card or work out an installment schedule. This can even out your cash flow and make the debt more manageable for your customer.

4. Give yourself a gift. Developing positive relationships of mutual respect with your customers will, above all else, ensure that you are paid. That requires thoughtful, consistent communication. Demonstrate your concern for their problems and let them in on yours. By building an accounts receivable plan that accommodates the financial considerations of you and your customers throughout the year, you can avoid having to bug them when next year’s fiscal year-end rolls around.