Listen closely at the end of each month and you can hear millions of small businesses lifting their voices in the same cry: Why don’t people just pay their bills on time?
For a lot of us, debt collection is way down on the list of business tasks we like to do – somewhere after washing the coffee cups and taking out the trash.
Between the people who yell, the people who cry, and the people who just ignore you, collecting on past-due bills can leave you feeling pretty low.
But you can’t just ignore unpaid invoices: this is your money we’re talking about! You deserve to get paid!
We asked our debtor management Zembrites for some advice about how to collect on overdue invoices without feeling like the bad guy. Our team is really good at collecting late payments without ruining relationships. And they actually like doing it. So, get ready to take some notes and read on.
Collecting on unpaid invoices
No matter how easy you make it to pay on time, some people will still miss the due date.
They may have run into financial straits. They may have a disorganised payment system. Or they may just be a deadbeat who will do whatever they can to avoid paying.
It doesn’t really matter why the customer hasn’t paid yet – what matters is that you get what’s owed to you.
1. Don’t let it languish. The longer a debt goes unpaid, the harder it is to collect. Let’s say your invoice had 30-day terms. On Day 31, check to see if it’s been paid. If it hasn’t, reach out with your first friendly reminder. Keep reaching out until you get a response. Here are some handy templates if you’re not sure what to say.
2. Mix it up. If your first outreach was an email and you got no response, try following up with a phone call. If both those channels are repeatedly ignored, send an official-looking letter in the mail. Send it registered post and require a signature so they can’t claim they never got it.
3. Be polite. An overdue payment might be an honest mistake. Don’t assume the worst. Getting a call from a debt collector tends to put people on the defensive and they might lash out. No matter how they respond to you, keep your cool and don’t say anything your grandma would disapprove of.
4. But be relentless. You’re being polite, not being a doormat. Expect to hear your share of sob stories (that may or may not be true). You can express sympathy for their money troubles, but you know who else is in danger of financial plight? You, if you don’t get paid what you’re owed!
5. Offer options. If you can, give customers in a bind the option to pay in installments. Getting your money piecemeal is better than not getting it at all. Make sure the terms of any payment plan are clearly documented and agreed to in writing.
6. While we’re on the subject, document everything. Before you call or email, have copies of contracts, invoices, and any other relevant documents on hand for reference. Every time you reach out, document the date, time, and manner of your outreach. Record whether you made contact or left a message, what you said, and how the client responded.
7. Stop credit. Don’t provide any new product or services to clients with outstanding debts until they settle the balance. Expect a clash with the sales team on this one - their targets are based on business brought in, not on revenue collected. Plus, it will probably put a kink in their relationship with the customer.
Hold firm, though. Remind sales signatures on the dotted line don’t grow the company unless they’re backed up with money. Do give sales reps the courtesy of letting them know when one of their customers falls behind so they don’t hear it for the first time from the customer.
Businesses are built on relationships, so take care of yours. When a customer responds with a payment, send them an email thanking them. A little pat on the back (even for doing something they should have done sooner) will make them feel good and make them more likely to keep paying.
The two most critical things you need to get the money you’re owed are politeness and persistence. If you just don’t have the time (or energy) to deal with collections, or if your soft heart leads debtors to treat you like a doormat, call in some help.
