If you ask a search engine what you should do when customers are late paying, the top options will most likely be links to debt collection agencies. This is a good way to remind customers of their obligations, and will get good results, but it’s probably a last resort.
If you are running a business that has great customer service and you take pride in maintaining a good working relationship with suppliers, then the heavy handed approach is not a good first option. Here are some ideas for a softer approach, that will be more effective and allow you to sustain good business relationships.
Get the facts
A phone call is always a good first step. It might well be that your invoice got lost in the post or misfiled. If you are uncomfortable using the phone (and many people are), try to view the first call you make as a friendly ‘fact finding’ exercise. If you discover that it’s a genuine oversight and the customer pays you straight away, then it’s a huge time saver and a box ticked. You can move on with your day. If you are uncomfortable with their response, or the problem persists then it’s time to make some plans and go into ‘negotiation mode’.
Make a realistic plan
Work out the minimum payment you will accept before you start negotiations, and decide how long you would be prepared to spread the debt over. If you open the discussion knowing what you would settle for, this gives you the wiggle room to start high.
If the customer agrees to your first ‘high’ offer then you are winning. If they negotiate you down to your minimum then it’s a slight disappointment, but you won’t feel cheated, and you also appear reasonable and flexible.
This is true of all your interactions with clients. Whether you are passing the time of day or having a difficult negotiation, it’s important to keep a businesslike persona. Treating your customer with respect will help you maintain a good working relationship.
It’s really tempting to get angry when you feel let down, but by staying calm and listening to what your customer is telling you, you are far more likely to reach a better outcome.
In the world of police interrogations an effective line of questioning will involve the officer appearing to sympathise with the criminal. They don’t sympathise at all, but this is an element of their strategy for getting information. If they go in hard and accusatory they would get no results at all. TV dramas would have us believe that shouting and intimidation gets a confession, but the truth is that human beings are far more likely to respond favourably to someone they like. If you stay professional with an overtone of understanding, your client is far more likely to want to please you. If they are in debt to a few suppliers you may well make it to the top of the payment list just by treating them with sensitivity.
Putting a hold on the customer account might be an action to consider when they fall into debt, and it does send them a clear message that they can’t have something for nothing. They might be stretching beyond their means but by withholding your services they realise your worth and their future orders may be more realistic. You could even suggest as part of negotiation for repayment that you reduce your services going forward. This lets your customer know you have a positive attitude and are on their side, but you want to be sensitive to their circumstances. Keeping a customer in the long term is always preferable to losing one because they can’t afford to pay.
Remember to update your records when you have spoken to your customer. Include all the main points you agreed on and send a confirmation email so you both have a written record.
Keeping precise records is good practice and helps you know exactly where to find information quickly. A good quality online system will keep the information centralised and allow you and your team to make notes that are shareable. Here at Xpert Technologies we take pride in offering a range of Fintech tools specifically designed to empower business owners to effectively manage their finances.
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