Small business collections can be a touchy subject. For many small businesses to survive, the business not only needs customers but paying customers. Well, what if you have a customer that has already received the goods or services, yet has an outstanding bill that is well overdue? You can make a friendly phone call asking for payment or you may want to send a reminder notice. You could even contact a collection agency or an attorney to seek payment on your behalf.
Before making any decisions, it is important to decide what is in the best interest of your business in the long run. In addition, what may be best for your business is not having an angry customer. Without a doubt, the best small business collection solution is having an accounts receivable structure that encourages prompt payment. Creativity can really be beneficial in minimizing delinquent accounts. Here are some great tips when it comes to small business collections.
Tip# 1: Offer an incentive. Customers are more likely to pay their bills on time if they have a reason to do so. You may want to consider a trade discount. For example, if the bill is paid within 10 days of receiving the invoice, the client will receive a 1% discount. Having an invoice that offers the benefit to paying early will generate quicker revenue and also increase your chances of receiving payment. Many companies encourage full payment once the product or service is delivered. However, that may not be the best option for all businesses, so it is critical to create incentives for early payment.
Tip# 2: Send reminders. Make sure the reminders that you send are friendly. This will also increase your chances of receiving payment, and it keeps the business relationship pleasant. Reminders can range from a nice phone call to a simple post card. It is important to be polite and professional with all collection matters. With small business collections, you don’t want to come off as being too causal either.
Tip# 3: Encourage prepayments. As stated earlier, the only way to ensure definite payment is to request it when goods or services are being offered. To avoid any future hassles, you may want to request payment prior to goods or services being rendered. If you have several clients, encourage them to establish a direct withdrawal system. Of course, many of your customers will not be interested. You will have to demonstrate why they should take this route. It would also be a good idea to offer some type of incentive with this as well.
The good news is that most of your customers will pay on time. However, there will be a small percentage that won’t. By taking the time to develop an accounts receivable structure that encourages prompt payment, you will decrease your chances of not receiving payment. These tips allow small business collections to be handled in a much more effective manner.