Unless you are collecting payment in full before providing your goods and services, you know all too well that a sale is truly not a sale until that invoice gets paid. Late payments impede cash flow, which wreaks havoc on your business. Delaying collection on past due accounts is an all too common practice among small business owners, with reasons ranging from poor management of receivables to a fear of alienating customers. But, this was a business transaction and you have every right to be paid as agreed upon. It is a good bet that small business owners dread making collection calls as much as people who don’t pay their bills on time dread receiving them. So, in order to minimize the amount of times you must engage in this unpleasant activity, follow the below tips to maximize the effectiveness of your communication.
Always Be Prepared
The Boy Scouts motto is applicable to all things in life, including making collection calls to customers. Before you even get on the phone, gather all the information you need. Have a copy of the invoice, the purchase order, proof of delivery and any other relevant documentation. You do not want to create a situation where lack of information necessitates ending the call without any sort of commitment to payment. You also want to prepare in a general sense. While you may end that call with a resolution, there is a good chance you will get a lot of excuses. Make a list of common ones and rebuttals to maintain control of the conversation and get the bill taken care of. If the ‘’check is in the mail’’, ask for the check number, payment amount and date it was mailed. If your customer claims cash flow issues, discuss payment plans.
Get in a Confident Space
How you come across on the phone can make all the difference in the outcome of the call. If you seem hesitant or unsure, the debtor will not take you seriously. Smile when you talk—it comes through in your voice and makes you appear confident. While money matters can be uncomfortable to discuss, keep reminding yourself that you have every right to make this call. You deserve to get paid, and your customer knows that they are obligated to pay you. This mindset will help you communicate more effectively. Be friendly but firm. Maintain ‘’eye contact’’ by focusing on the call and nothing else—no fiddling with stuff on your desk, looking around or checking email.
Every Call Should End with a Commitment to Pay
Effective collection calls end with a clearly established plan of action. By the time that phone call is finished, your customer has committed to doing something, whether sending half the payment today and the rest next week, a full payment by next Thursday, or settling the invoice through a payment plan. Reiterate any solutions to make sure everyone is clear on what the next steps will be. Take detailed notes about the conversation so you have something to reference should you have to call again. Hopefully you won’t.
How to Deal with Poor Cash Flow
If late payments and other issues are putting the squeeze on your working capital, there are a few ways to improve your situation. First and foremost, invoice customers as quickly as possible. Create a set process for dealing with late invoices rather than dealing with them haphazardly. The vendors who show they mean business about settling accounts move up to the top of the pile, while those who are lazy about it will be pushed to the side until your customer is forced to deal with you. Consider AR factoring for customers who have a history of timely payments—minus a fee, you will get between 80 and 90 percent of your invoice immediately with the remainder being paid when your customer pays. Do not pay bills until they are due. See if you can work out different payment schedules with suppliers to sync up better with your receivables.