If you run a business, you are probably well aware that the most ideal time to collect your debts is long before they become overdue.
To help you do this, you make sure that your business has foolproof invoicing, client management and accounts processes. They will surely stop any overdue payment issues, right?
Well, as much as we would love to say that having the best processes in place will save you from outstanding client debts, we can’t. These processes will certainly make it easier and more efficient for you to keep track of delinquent clients, however, there are unfortunately many reasons as to why customers are not paying their invoices.
If you’re reading this article, chances are that you’re struggling with overdue invoices and delinquent customers. So today, we want to take you through the steps that can make negotiating and settling your debts with your debtor a whole lot easier.
How to Negotiate with a Delinquent Client
Whether you’re regularly struggling with overdue accounts and customer payments, or it’s only happens once in a blue moon, you need to know how to handle these situations.
When people hear the word negotiation, they may picture huge business deals behind closed doors and start to feel a little nervous. However, negotiating doesn’t need to be intimidating or scary, it can be simple, and can actually help you come to a resolution with your debtor very quickly.
Here are our tips to makes negotiating with your debtors a lot simpler.
1. Make sure you communicate with your customers regularly.
A simple mistake people make when it comes to invoicing and customers is a lack of communication. Now, we’re not saying you have to pick up the phone every week and have a chin wag about everything new in their lives.
When we say communication, we actually mean sending reminders to customers. So, say you send your invoice out and you have 30-day payment terms, once you’ve invoiced them, don’t wait until the 30 days has passed to get in touch. Set up a process to ensure you’re sending a reminder in the week of the invoice being due – that way if they don’t pay, you won’t be contacting them out of the blue, and they can’t use the excuse of forgetting about the invoice.
When it comes to communicating about payments and invoices, we recommend having the following communication plan in place:
- Send your invoice
- Send a reminder of payment due date, closer to the due date – we suggest in the week the payment is due
- If a customer does not pay by the due date, send an overdue reminder (1-2 days after the invoice was due)
- If still unpaid a week past the original due date, send a final payment notice
If you haven’t contacted your customer since you sent your invoice and it’s now overdue, it can make opening up the communication channels a little harder and may lead to them avoiding speaking to you.
2. Find out why they haven’t paid
Understanding why your customer has not paid their invoice can be very eye-opening. It might lead you to learn that your payment terms aren’t great; or that your invoices are difficult to understand; or perhaps that you’re not doing enough checks and balances before embarking on working with customers.
There are plenty of legitimate reasons why someone hasn’t paid their invoices, including that they simply forgot.
Even with the advances in technology and lots of different ways things can be automated, there is still the simple fact that people forget things like paying bills.
While, of course we would love for every customer to pay their invoice as soon as they get it, understanding why they haven’t paid will help lead you to finding more solutions and efficiencies for your business processes.
3. Provide payment options
Once you know why your customer has not paid their invoice, it’s time to give them a way to pay. If they are struggling with affording your invoice, offer them a payment plan. While it is frustrating to have to compromise in this circumstance, sometimes, a payment plan or providing potential payment solutions to them can lead you to being paid – even if it isn’t as fast as you would like.
When it comes to payment plans, you want to provide them with a realistic payment plan that isn’t going to put your cash flow in any further jeopardy, but also something that is seemingly achievable for them to manage.
A payment plan shows that you’re flexible and willing to negotiate, but also that you’re serious about them paying their debts.
If your customer does not agree to your payment plan offer, ask them to provide a counteroffer. This might offer some insight into their capabilities and may also provide you with some learnings – especially if you’ve never had to do this before.
In addition to payment plans, it’s a good idea to have payment options. For example, if you usually only accept credit cards, can you accept bank transfers or direct deposits? It’s a good idea to offer a variety of ways that people can pay, which might also help to lower the number of excuses clients might have.
4. Review your payment terms and business processes
If you find yourself dealing with overdue invoices and delinquent customers regularly, it is definitely worth reviewing your business, payment, and trading terms.
Is there something in your terms that is difficult to understand or misleading? You might find this out when you discuss with your customer as to why they haven’t paid their invoice.
Your payment terms might be too long, which might be leading your customers to forget about paying them. Or the length of your payment terms might be disrupting your cashflow and making it difficult for your business to comfortably survive.
If you don’t have clear terms and conditions for doing with you, you can guarantee that you’re going to run into problems more regularly than if you do. That’s why it’s worth revieing both your trading and payment terms on a regular basis.
You might find that it’s not necessarily your payment terms or trading terms that are impeding your business, rather, it’s the customers you work with. So, how do you vet your customers in the first place? Are you running credit checks or background checks? What information are you getting from your client before you agree to working with them?
5. Know when to bring in the professionals
Settling debts with delinquent customers is time and money consuming; it’s frustrating, and let’s face it, it can sometimes be awkward.
So, if you have a clear payments process in place, like we mentioned in our first tip, if that turns out to not be successful with your delinquent customer – then it is probably time to think about working with a professional debt collector.
Some businesses avoid working with a debt collection agency because they think that it might impact their own business’ reputation negatively. However, this is just a common misconception (amongst others).
A debt collection agency has professional skills, expertise, knowledge, and resources to make debt collection a lot easier. And the reality is, if you work with a professional team, like us here at JMA Credit Control, you can be assured that your debtor knows that you are serious about your business and their debt.
Settle with your debtors today
Recouping outstanding debts and payments can be frustrating and time consuming, however, there are things you can do to make sure you’re in the best position possible when you are faced with a delinquent customer and an outstanding payment.
If you want to work with a debt collection agency that offers professional, efficient, and affordable services all over Australia, then get in touch with us here at JMA Credit Control. In addition to our debt collection services, we also offer Credit Consultancy, Credit Reporting and Credit Insurance, so we can help you make sure you’re working with the right customers.
Call us on 1300 664 223 to discuss how we can help your business today.