If you’re starting a new business, you want to believe that all of your customers will pay their bills on time and in full. Unfortunately, that won’t always be the case.
That’s why it’s necessary to set up policies and processes to get the money you’re owed so that your business doesn’t suffer because of late-paying and non-paying customers. The earlier you do this, the fewer long-term problems you’re likely to encounter
Why don’t customers pay?
There’s no one reason why customers have payment issues. Some are simply disorganized or procrastinators. They may think they don’t really have to pay until they get a phone call or a “final notice.” These customers may just need more reminders and possibly some disincentives for late payment (or incentives for early payment).
Often, a customer who is usually good at paying on time runs into their own financial struggles and may have to prioritize the bills they pay. Unfortunately, yours may not be at the top of the list – especially if they’re looking at having their utilities cut off or perhaps have collectors after them from other creditors.
It’s a good idea to make your invoices as clear as possible. Highlight or bolden the amount and date due so customers can easily see it – whether the invoice is online or on paper.
Different techniques work better for different customers
It’s wise to have multiple debt collection techniques in your arsenal and know which to use for each situation. These include:
- Shortening terms (for example, from 30 to 20 days) so you have more time to get your money without your cash flow being interrupted
- Prioritizing your collection efforts to focus on those who owe you the most first and spending the most time and effort with those customers
- Offering to settle for a smaller amount if you determine a customer really can’t pay the full amount they owe
This last one is a common practice. It helps businesses get as much of what’s owed them as reasonably possible without spending more on collection efforts than they’re going to get from customers.
Having legal guidance as you develop these policies and processes and if you need some help with collection efforts is a good idea. It can help make collection efforts more effective and prevent you from running afoul of collection laws.