Chasing overdue accounts as the end of financial year looms is a crucial business action – and one that some businesses put off or need a hand to address.
The truth is that debtor management is often one of the most difficult aspects of effective cash-flow management. So what can be done?
Issuing written reminders or SMSs to clients is an obvious step, and this move may be sufficient to prompt tardy but well-meaning businesses to pay their bills. However, making direct phone calls to habitual late payers is a far more effective way of finalising debts before the end of the financial year.
Business owners and credit departments are often reluctant, though, to make these tough calls, or they may feel they lack the experience to communicate with clients in a way that gets results. The upshot is that slow-paying clients continue to receive extended credit, helping their cash flow and blocking yours.
With that in mind, here is a simple three-step guide to debt-collection calls.
- Be prepared
Make a plan and a commitment to targeting outstanding debts. Simply picking up the phone and cold calling a late payer is unlikely to work. Before calling, make sure you have all the relevant client information in front of you as this will give you confidence and prevents the client from dominating the call.
You want to avoid saying, “I’ll have to get back to you” because this delays debt recovery and provides another chance for debtors to avoid you.
- Know the facts
As part of your preparation for calls, gather all the necessary account details. This typically includes:
- the amount owed
- what they purchased
- the payment due date
- their terms of trade
- where the invoices were sent
- details of other outstanding invoices
- their payment history.
When you are armed with this information, there is little wriggle room for debtors.
- Be ready for excuses
Habitual late payers often have a litany of reasons for not being able to pay. So be ready. Make a list of likely excuses and prepare appropriate responses. Here is an example of a possible call.
Customer: We have some cash-flow issues, so we won’t be able to pay this week.
You: I understand juggling cash flow can be challenging. How about you make a partial payment today, and we arrange a payment plan for the balance? How much would you be able to pay today?
What works with one client will not necessarily work with another. However, planning inevitably leads to better results.
Consider professional help
If this is still too daunting, an alternative is to engage debt recovery experts to make those calls for you, allowing you to get back to running your business. Such specialists have structured processes to follow and can stress to debtors that you will not let outstanding payments slide.
Remember, the squeaky wheel gets heard. Act now so you can prevent end-of-year payment blues.