Getting your customers to fulfil their payments can be a difficult task when the economy is booming. So, imagine how tough it can be during periods of economic decline – like what we are experiencing right now the coronavirus pandemic. As millions of businesses close their doors because of diminishing returns, other business owners have remained afloat, mostly thanks to government assistance, effective credit management or because their product range includes popular essential items.
If your business is struggling through tough times, then you’ve come to the right place for some reliable, nifty tips on how to manage your debt finances during this challenging period.
Use payment reminders
If you’re in a bit of a credit crunch, then simple, friendly reminders to your customers can help you get the necessary funds into your bank account as soon as possible. While some customers might still be unable to pay (because of their own financial difficulties), you’ll at least be able to get some cash from customers who can pay and have just forgotten. These reminders must be personal, friendly and compassionate since the last thing you want to do is deter customers from paying because they feel threatened or “hard done by”. Make sure you include payment options, details and contact information to make this process as quick and seamless as possible!
Make direct contact if reminders prove ineffective
Most businesses have encountered at least one customer that seems to disappear off the face of the Earth when payment deadlines roll around. If you’re still getting no response from the customer, then switch to more direct methods – like phoning them. Most business correspondence is via text or email, so an immediate phone call should be your next step. While some businesses will try and initiate a face-to-face meeting (sometimes spontaneous), be aware that this can backfire if the payee feels threatened or boxed in.
At the end of the day, they owe you money, not the other way around (so you’re in the right). If you’re courteous, understanding and respectful of their financial struggles, then you’re more likely to come to a suitable arrangement. Fostering a close, professional relationship with the customer will help build a viable, long-term professional relationship (useful for future payments) and increase the chances of you receiving your full payment in the short term.
Use a debt collection agency
If you feel like you have exhausted all avenues and options on your end, then the next logical step is to get help from a professional debt collection agency (also known as a factoring firm). There are thousands of collection businesses, like Nexa collection agency, who help US health practitioners receive what they are owed from patients (from past medical bills). They’ll pay you approximately 80% of what you are owed up front, and then chase up the debts in full from your customers. While you won’t receive the total amount, you’ll get a good chunk of them!
For Australian-based customers, you must be aware of the current legislation and rules regarding debt collection practices. If you are unsure, check out the information guidelines and prescriptions outlined by the
Federal Trade Commission (FTC), so you’re aware of all the rules and appropriate boundaries.
Offer discounts for early payments
While it will eat into your profit margins, a lot of business owners swear by this strategy. Indeed, offering discounts for early payments incentivises customers to fulfil their obligations to you, since it’s saving them money. A simple 10% discount could go a long way in helping you maintain your short-term and long-term liquidity positions, even if it means sacrificing your overall revenue.
Have precise payment methods in all contracts
This is more of a precautionary method of improving your credit inflow, as opposed to collecting debts. However, if you ensure that all customers are aware of their payment responsibilities, including preferred method, exact amount, deadlines and other vital details, then you’re more likely to receive the money on time. Make sure you walk every new client and customer through the specifics of their contract; that way, there is no confusion when payment deadlines roll around.
Maintain regular contact
Another reliable credit-maximizing strategy is to maintain ongoing communication with your customers. The purpose of this is to cultivate and develop a personal relationship with the client and help them to see you as a reliable and dedicated provider. That way, when it comes time for the client to pay up, they’re less likely to renege on payment.
Ship goods after payment has been received
If a large chunk of your income comes from shipped goods and online payments, then you must receive compensation before sending the goods. Shipping the items before receiving payment could leave you vulnerable to scammers or dodgy customers who never had the intention of paying you what you were owed.
Naturally, you can relax this policy with loyal, repeat customers who you trust will pay the full amount. However, for new customers, especially, make sure you enforce a “pay first, ship later” policy as a way of protecting you financially.
So, there are clearly many ways you can improve your debt management strategies. If none of the strategies at your disposal proves useful, you can always ask a factoring company to handle your debt collection needs.