(This is a blurb I wrote for our local Chamber of Commerce Newspaper)
In an economy sliding south it is more important than ever to collect your receivables quickly and efficiently. It can mean the difference between success and going out of business. Here are a few quick tips for collecting money. These tips work in good times and bad, but are more important now than ever. Your goal as always is to get your bill to the top of the pile.
Thirty days have elapsed and this customer, who is a good customer, is late again. What do you do?
You can send another bill as a reminder. It takes about a second to put that in the circular file so the pressure is gone as soon as the bill hits the desk. You can even add a threat – “We will cut off service” – except in reality you don’t want to lose a customer; you want to get paid. So what works?
PICK UP THE PHONE: This is your customer. You want to do more business not end the relationship. Call them up; ask them what is going on. What problems are they facing? Find something to talk about. And set a date and amount for payment. If they think they are getting a big check next month, ask them to make a smaller payment this month. Get the process started.
Never hang up the phone without making progress toward the next step. If you can’t make progress the problem is serious.
BE NICE. YOU ARE ON THE SAME SIDE: You want the debtor to succeed because when he does, you get paid. Show an interest in his business, root for his success, and be genuine about it.
This accomplishes several things: What you learn about the debtor’s business may provide some leverage later on if you need it to file litigation. If you are in the business of selling something, the more you know about your client’s business, the better for you. And most importantly, it is easier to pay someone you like than someone you don’t like.
THERE ARE ONLY 2 NEGOTIABLES: TIME AND AMOUNT: Never get off the phone until you have confirmed when the debtor will send the payment. If they can’t pay in full, set up a payment plan, and make sure they follow it. If they promise the money on Tuesday and it doesn’t arrive, call Wednesday and ask them when they mailed it. Once the debtor realizes you are keeping track it becomes easier to pay you than not.
DO NOT WAIT TOO LONG TO REFER THE DEBT OUT: When do you send the debt to someone else to collect?
If you are not willing to contact your client by phone or in person or don’t have time, you should wait no longer than 45 days to send the debt to a lawyer to collect. After 60 days your chance of collection falls significantly, so every day is costing you money. And if you aren’t doing anything to collect the debt, your client is going to pay people who are.
If your client doesn’t live up to the date you set, and doesn’t call to tell you in advance, or return your inquiries, it’s time to consider sending the matter out. If the debtor does not keep his word, send the debt to a lawyer to collect. Lawyers have leverage. A letter from a lawyer will often get your bill to the top of the pile. Always hire a lawyer on a contingency basis. That way, if they don’t collect your debt, you don’t have to pay them.