One of the biggest issues many small businesses have is collecting on overdue accounts. Your business can end up with serious financial issues if you don’t have a plan in place to make sure your customers pay in a timely manner. You have to implement formal credit policies and terms and stick by them.
Here are 6 tips to help you collect on overdue accounts:
1. Ask for deposits whenever possible. If your customers want large orders, request that they make a deposit to make the sale. These deposits should be clearly stated that they are non-refundable; this will make sure that your customers intend to pay for their purchases and you won’t have any worries about fund shortages.
2. Allow credit card payment. When you take credit card payments, you practically eliminate overdue payments. It also makes it easier for your customers to make payments, which will reduce overdue payments to you. If your customers can’t pay the total amount up front, credit cards are the best solution. They can pay a portion of the purchase price up front, then, when the product or service is received, they can pay the rest.
3. Allow both cash payments and invoices. When you accept cash, there is no risk of overdue accounts. Your sales will increase and you will have no issues with customers who can’t pay you.
4. Establish progress payments in stages. If your company furnishes goods or services over a long period of time, you can offer your customers the option of paying percentages of their purchase price in stages throughout the process of the service. Start with a non-refundable deposit, then work out a percentage as the project progresses.
5. Develop a standard procedure for overdue invoices. Your business needs to put in place a formal, written collection process when you contact customers who have overdue accounts. You should be firm but courteous. The first contact is generally a friendly reminder that payment is due, then, in 2 weeks, you should follow-up by letting your customers know they are in danger of having their account sent to collection. If, after 30, 60, or 90 days, depending on your policy, a payment has not been made, you can send the account to collections.
6. Always be polite when indicating an overdue invoice. It’s a good idea to steer clear of harsh letters in the first stages of collection. If you start off with an angry tone, you customers may just try to avoid you altogether and you’ll risk not getting any payment from them at all. The best advice is call you customer and ask them if they have received their invoice and offer to re-send it. Generally, they are more than willing to take care of it right away, as long as you courteous. It’s also a good way to keep loyal, paying customers.