This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.
"Collections is the process of completing the sale," according to Abe WalkingBear Sanchez. As the endorsed Credit Consultant to the 4500 combined members of STAFDA and PEI trade organizations, he advises companies to make collection calls using a positive, sales-oriented approach.
Adopt a relationship-building mindset prior to making a call to collect on past due balances. Focus on uncovering customer needs, addressing concerns, proposing solutions, fixing problems, and continuing to promote your company as a valued resource to customers — especially those with potential for repeat business.
Some business owners may be able to pick up the phone and start a meaningful, rewarding conversation with customers...and quickly resolve any problems and collect all money owed within minutes. Some situations call for simple actions. For example, if you've shipped an off-the-shelf product and have a signature confirmation of its receipt, then making a quick call — without investigating the details of the transaction — is a reasonable next step.
Research is advisable when collecting payments on complex transactions or past-due invoices valued at thousands of dollars. For example, if your company has just delivered a newly developed chemical guaranteed to reduce water treatment costs, made a major upgrade to an office building, or added RDFa tags to a website, then taking a moment to review all communications and invoices before dialing (or making an office visit) can be crucial to having a productive conversation.
Review and have handy before making a call:
Put yourself in a relationship-building frame of mind with the dual goals of assuring customer satisfaction and getting what's owed to your business. An empathetic, confident tone of voice invites honest discussion.
Take these steps:
At some point in this conversation, the customer may explain to you why the invoice hasn't been paid. It's likely that you'll reveal a glitch in your company's or your customer's business processes; or an obstacle to your customer's ability to pay.
Problems you may encounter and possible paths to resolution:
Timing calls can be crucial. WalkingBear, a recent panelist and featured speaker at the World Credit Congress in Dublin, recommends calling commercial accounts on Mondays, creating momentum that builds throughout the week. Call consumer accounts toward the end of the week, as many people get paid on Fridays. Begin with your largest accounts for the strongest impact on cash flow. And, don't wait until a bill is seriously past due but make a call quickly after the due date.
Document commitments and follow up to make sure everyone adheres to promises. If a customer doesn't pay according to agreed-upon terms after you've dealt with any operational concerns, then a different approach is needed. To get payment and encourage repeat sales, find an alternative way of doing business that doesn't involve consistently asking for payments on past due balances.
As WalkingBear emphasizes in Timely Cash Flow Tips:
It's critically important to manage accounts receivable because keeping customers current leads to repeat sales. Companies can't afford to lose customers during tough times, and one way to keep them is by making sure they stay current on their accounts.
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