Communicating with Slow Paying Clients – Part 2
In Part 1 of this series, we discussed the difficulty many small business owners have when it comes to dealing with slow-paying customers, the importance of clear and open communication and some tactics that can help you avoid the problem in the first place.
Unfortunately, even if you heed the advice in that article, you’ll undoubtedly have to deal with a slow-paying customer at some point. The key is to control the conversation, and your emotions, and not put it off.
The longer you avoid the problem, the worse it will get. Contrarily, taking control of the situation can be a very empowering experience that can a have -positive impact not only on your company’s bottom line but on your own mental outlook.
Starting the Conversation with Slow-Paying Clients
Start by asking the reason for the delinquency. You may find that your customer has simply run into a temporary cash flow problem and that payment of the outstanding invoice is forthcoming. If that’s the case, be polite but firm in asking for a definitive date when you can expect payment. Follow up immediately with an email that includes the agreed-on date you expect to receive payment.
As the agreed-on payment date approaches, send out a reminder email. In it, you should reference your earlier conversation and follow up email, and ask that the customer contact you immediately if they are not going to be able to meet their obligation.
When to Stop Talking and Take Action
If these good-faith efforts to collect don’t get results, it’s probably time for a different approach. Depending on the relationship you have with the customer, the amount of the past due invoice, and your own cash flow situation your options may include:
- Write off the invoice as a loss
- Offer to accept a lower amount to settle the matter
- Turn the matter over to a collection agency
A fourth and increasingly popular option for many small businesses dealing with slow-paying clients is to employ the services of a factoring company. Invoice factoring offers a number of benefits including:
- Funding of up to 95 percent of the outstanding invoice
- Funding in a little as 24 hours
- All collections actions handled by the factoring company
- No negative impact on your client’s credit rating which will allow you to maintain the relationship if you choose to
Click here for more information on accounts receivable factoring.