From following up sales leads to putting out fires, as a small business owner you’ve got a million things to do – and never nearly enough time to do them all. If you’re like most, chasing debt is low on the list of your favourite tasks to do.
Small business debt collection can be an unsavory part of entrepreneurship, but it is critical that your company follows up diligently on every overdue account for product sold or work performed. There are ways, however, of making the job easier and more rewarding than it could be. Here are nine of them:
- Be clear on all invoicing, statements and contracts when payments are due and how long customers have for a grace period (if any). Make your first call immediately after the due date to show your business takes this commitment seriously from its customers.
- Offer slight discounts (2 to 5 percent can be a significant incentive) for early payment to reward customers who proactively help your cash flow.
- Accept credit cards. According to Freshbooks, an Ontario-based small business accounting software company, its stats show that businesses accepting online payments get paid on average 11 days faster than those who collect payments using traditional methods.
- Make it pleasant to pay. Using a device-based service like Apple Pay or Google Pay can make it quick and even enjoyable to pay you immediately with a mobile app or smart watch. MRI studies show that paying electronically creates significantly less of a pain response to the customer.
- Stay top of mind. Don’t put off calling late-paying customers because it’s uncomfortable to talk about money owed. This just adds to the problem of non-payment and sets a bad precedent.
- Limit extensions of credit to only accounts who have proven their dependability in payments made on time. Loose credit granting is a fast track to big cash flow problems.
- Resist the temptation to let even a good customer to slide for a while. Most businesses, and especially those with cash flow problems, have a secret (often mental) scoresheet of which credit grantors need to be paid immediately and which are pushovers. Small businesses often dominate the “pushover” list.
- Resolve all disputes promptly. If a customer has a problem – big or small – with the order, find a way to make it right or agree on a satisfactory resolution, even if it involves giving a discount or going to additional cost. Get the customer to agree in writing that the dispute is (or would be) closed upon taking the agreed-upon action. It may save the relationship, and will provide a critical foundation if you need to take further action.
- Get professional help. Consider enlisting a good small business collection agency for more difficult business debt collection if the customer breaks promises or uses stall tactics.