04/ 15/ 2002
by Ted Tate
Some business people feel uncomfortable calling past due accounts. They feel it makes them look "small" in the customers eyes (it doesn't), that people will pay eventually (some will never pay), or that it makes your business look needy.
But when customers are late paying, procrastinating can make things worse. Every day an account goes past due reduces your chances of ever collecting your money.
Richard L. Christopher, president of All-Star Limousine in Cleveland, Ohio, has dealt with slow payers and offered these strategies on collecting:
- Explain your credit terms and make sure customers understand them at the time of the sale. Ask if they will abide by them. Some large corporations and all government agencies have their own polices. Be sure you understand how payments are made and that you can afford to wait.
- Telephone the person who signs the checks. Past due notices or collection letters are too easy to ignore.
- Watch for these red flags when you call: Debtors lie or misrepresent the facts; offer creative but implausible stories; are vague and won't commit to a firm payment date; or the person responsible for paying avoids your calls or they become rude.
- Don't apologize for calling or joke around. It comes across as weakness, giving some the impression you can be stalled further. Be friendly but businesslike.
- Be prepared to e-mail or fax a duplicate invoice immediately if they claim they can't locate the invoice.
- Cut off further credit until delinquent accounts become current. Offer to do business on a cash on delivery basis or on a credit card (if you take them). Christopher said allowing someone who can't pay a bill more credit can only make things worse.
- Be persistent. The saying, "The wheel that squeaks the loudest gets the grease" is true. Don't be surprised if accounts require more than one call.
- Offer to take progress payments, perhaps half now and half in 10 to 30 days, as a last resort.
Ask business friends for the names of any attorneys they've used successfully who specialize in collecting debts on a contingency basis (usually 30 percent to 50 percent of the money actually collected). Turn accounts you can't collect over to a collection attorney.
This article originally appeared in the September/October 2001 issue of MyBusiness Magazine, NFIB's member magazine.
