Improve Your Business Debt Collection Process With These 8 Steps
Whether you are a company trying to manage collections from customers (B2C) or other businesses (B2B), you probably already know that not all can pay their bills on time. Sometimes, clients overlook the deadline due to numerous invoices during the same period, while others lack the funds they thought they’d have for your service.
This can be really risky because when clients don’t pay their invoices on time, your business would experience a gap in the cash flow; a gap in cash flow would mean you won’t have or have less cash for all the expenses!
Avoid this kind of dilemma by putting effective debt collection strategies in place. Here are some steps to improve the process:
1. Check the existing communication procedure
Like in many other things, the adage “communication is key” also holds for debt collection. You need to clearly communicate to the client their upcoming invoice, and when they are already late for payment. You can’t just leave things as is and wait for everyone to pay you even when it’s past due. Remember, you are in a position where you need to efficiently manage cash flow and work towards achieving bigger profits.
By bridging communication gaps, you will be able to improve the total process. How do you do that exactly? Here are some things to keep in mind:
- Ensure that the whole sales or operations team properly explains the whole process for credit terms when the customers are buying your products or services. Initial screening should be a standard procedure before proceeding with the sale.
- Make sure to send invoices through email or app (if applicable)
- Aside from regular sending of invoices, determine when you should follow up. Do you need to submit a brief email? That would work for some, but the other pressing debts may require phone calls. Make sure that there is an internal policy in place so your debt collections specialists could reach out to the clients when they are already late for a specific number of days.
It is extremely important to enable better cooperation through constant and clear communication internally and externally.
2. Make sure your team is preparing accounts receivable aging reports
While it is important to regularly reach out to and follow up with clients who owe you money, it is equally important to prioritize the people you need to start calling.
If you have a complete accounts receivable aging report, then you can use that as a reference for your communications. Don’t just blindly make calls to all customers on your list. You might end up pissing off clients who pay on time and cause them to stop patronizing your business. Ensure maximum efficiency by having collection specialists prioritize the customers they need to call.
3. Be as detailed as possible in your invoices
In line with the first debt collection strategy about communication, you can avoid bad debts by making sure everything is clear with your clients. The non-paying customers may not be aware that payment is due within a certain number of days. For example, they might think that the 30-day payment applies for a product they availed, when it actually has a special arrangement that makes it due for only 20 days.
Be sure your invoices are clear and keep slip-ups to a minimum. Complete it with below details:
- Itemized list of products or services availed from the company
- Invoice date
- Printed contact information of the creditor and debtor
- Unique invoice number
- Total invoice value
- Complete payment terms including available mode of payment, clear due date, and more
4. Offer easy payment methods
Consider making your clients’ lives easier by offering easy payment methods. This way, you are also getting rid of the associated delays that come with their debt.
For instance, when you are sending payment reminders, are you including a clickable link a client can use? Do you have the complete account number of the specified bank so they can easily refer to it? Reduce the friction and it will be easier for your company and the client!
5. Invest in a reliable invoicing technology
Are you generating invoices manually? While Excel is reliable, you can’t deny that that will definitely take some time! Ensure accuracy and efficiency by considering an invoicing technology that will not only complete invoices at a faster rate but also reduce different human errors.
Different app options can track client interactions, and automate follow-ups! All you need to do is identify the right app for your business, and you’ll be set!
6. Make sure you have the right contact person with whom you should file invoices
When it comes to B2B debts, it is highly important to get the updated and correct contact person to chase. Otherwise, you might go around in circles and end up getting frustrated.
It is better to file an invoice with the client’s accounting department to make sure they process it on time. If you send it to your contact person, there is a risk of it getting delayed as they still need to forward it to the accounting department. Mark from Marketing isn’t exactly on top of all company’s billings. Right?
Before closing a sale or service, make sure you finalize with whom you should file invoices. Additionally, know when you should follow up with that contact person with a friendly payment reminder, past due payment notice, final notice, direct customer contact, and a letter of demand.
7. Show empathy
For all you know, your valued client may be going through a horrific and life-changing situation that caused them to miss payments. Show empathy during their rough time to nurture your relationship while making sure there is still a payment plan in place.
8. Outsource debt collection services
There are instances when the only solution left is to get the help of professional and reliable debt collection specialists from outside your team to ensure maximum efficiency. Sometimes, outsourcing is the key!
Encourage timely debt payments by enlisting their help as they are skilled in giving top customer service support, and applying the right amount of pressure so clients would make good on their debt/s. They also avoid annoying and aggressive collection tactics such as harassment.
Let the experts do the work today! Send us a message to learn more about our debt collection specialists.
We’d love to hear about your project and get an awesome campaign started with you!