When it comes to collecting overdue payments of any sort, the best way to make sure the whole thing goes smoothly is to have a system in place that makes it as simple and painless as possible. While there is no specific ‘correct’ collection process, there is a general way of setting one up, a relatively simple set of guidelines and criteria to follow that will ensure that it mostly works. Of course overall the point is just to make sure that overdue payments get paid on time, because languishing debts can seriously harm the cash flow of the business.
Before due date, check customer satisfaction
The first thing to do is find a means of testing customer satisfaction. Whether you do this through a phone call, email, or letter is irrelevant, so long as you do it. This is because dissatisfied customers are much more likely to pay late. Therefore, if there is some aspect of your business that is creating a lot of dissatisfaction among your customers, you could be creating more fiscal issues for your own company. You should time these feedback surveys appropriately, a few days after you have rendered a service or provided a product, and a few days before a payment is due. In this manner you can provide a reminder without being overbearing, and possibly find a few flaws with your own system while you’re at it.
On due date, send a comprehensive written reminder
There is also the matter of overdue notices. How you go about these is critical to the probability of a customer being cooperative and paying their bill. Generally speaking, these reminders should be civil and professional, though more insistent as time wears on. The first notice usually assumes that the lack of payment was accidental: that the customer simply forgot, or that some outside factor interfered with them paying on time. Whenever you decide to send out your first overdue notice, it should simply be a reminder free of accusations ill-temperament. If the customer really did forget, a simple reminder is usually good enough to receive your money. Similarly, your second collection notice should be civil as well, simply reminding them that the situation needs attention and that things could get more complicated if they don’t pay soon.
When the date is over due, put pressure with a phone call
If the overdue bill remains at that point, it is time to discover why exactly it hasn’t been paid. The aforementioned notices can be easily ignored or forgotten, so you’ll likely need to take a more direct approach to reminding your client of what needs to be done. A phone call is usually a good choice. The purpose of this phone call is to find out exactly why the bill still hasn’t been paid, keeping in mind that the customer could be in a bad spot. While you do want to get a commitment to pay from the customer, it will do the process well to remain sympathetic to whatever factor is impairing their ability to pay. Of course, you should be ready for excuses as well, especially if the customer claims to have paid already. You should always ask for dates to determine when their payment should arrive if they really did do it. It’s also a good idea to send a collection letter that reiterates what was discussed in the phone call as a reminder of the situation.
If the payment is late, become insistent and firm
At this point you will simply repeat the process with a second or third phone call and collection letters, each more insistent and serious than the last while still remaining civil and polite. These calls should determine whether or not the customer can pay immediately, and if they cannot, they should set a due date for that payment. The third call however, is the most important.
Being the last call you make, it is important to stress to the customer that it will be their last chance to pay the bill before the matter is turned over to a collection agency. It would also do to stress the benefits of paying the bill before it reaches that point, such as maintaining good credit. After this call and letter, there will be no other option than to let a collection agency handle the matter, as the bill should be several months past due at this point.
While this process is simple, it is also efficient, and works to maintain a civil and cooperative atmosphere between your company and your client. The smoother this whole process can be, the less stress it will be on your cash flow and financial health.