It is a great problem for businessmen when they have customers who do not pay the money they owe for delivered goods and services in time. Most business people simply do not know how to carry on with such customers and feel really uncomfortable when they have to lead the conversation towards paying debts. Business is a serious sphere and there is no place for mercy and forgiveness. You came into business in order to earn money and you cannot simply forgive debts to everyone, otherwise, very shortly you will probably have serious financial problems. Your customers should know who is who; they must understand that you do not give an easy time for this matter. Only in this case you will get your money in time.
Non-payers can cause serious financial difficulties to any company, but especially to a small business company. The working capital of such companies directly depends on constant receipt of the expected funds and its further paying for growth and operation. Such financial strain can lead the business to fairly difficult circumstances. On the contrary if you manage to get in time the money from the customers who owe you, your business will definitely thrive. So you should learn to collect money quickly and efficiently.
First of all, before starting any relations with potential customers, it is very important to obtain as much information as you can find about them. You will probably need this information in future, if it turns out that they owe you money. We recommend you to take the following information during the negotiations with the customers: first name and last name, date of birth, addresses, telephone numbers, partners’ names and addresses, etc. With the help of the above information it will be easy to track down the person or the company very quickly and carefully. Please note that at the beginning of your collaboration and business relations customers do not have intentions to cause you any problems at all and they will be happy to provide you with all the information you require. But if you see that a potential customer does not want to supply the information or tries to hide it, it is time to think about the necessity of your collaboration with such customer.
From the very beginning you must gain control over your money, show your potential customer that you are a serious person and you need you money back in time. Remember that you should not issue a credit without a credit policy. Make sure that a customer fills out and signs a credit application before any business negotiations with him. Before extending a credit, it is important to check customer’s credit references. If you take these preventive steps, you will get your money back in time and as a consequence you will have more money on your account, you will definitely push up sales and have good customers in future.
Let us discuss some tips that will help you get started and avoid collection problems.
1. It is better to start from a little sum of credit. Remember that extending any credit especially for a small business company is a great risk. The most effective method to avoid having financial problems in collecting future debts is to extend the minimum amount of credit at least at the beginning of your collaboration with a new customer. Of course this fact can push away your potential customers, but in this case you are out of risk.
2. Before extending a credit, think and behave like a banker. It is unlikely that a bank would give you a credit without finding out some additional information about us. You should act with your customers just like banks act with the borrowers. We recommend not only to make sure that the customer fills out a credit application, but also to update them every year, because the financial situation changes very quickly. The more customer owes you, the more paperwork he should make in order for you to feel safe and ready for collection actions if needed.
3. Do not forget to remind about the debts. Some people feel quite uncomfortable, when they are obliged to ask for paying the owed money. But remember that it is your money and there is nothing to be ashamed of. You are recommended to create your own system of following up the bills. If you need your money back and the borrower is not really in a hurry, the best thing to do is to make a phone call. A live phone call usually brings more results than an E-mail or letter, because it is hard to ignore the request. But please always stay calm and patient. If your phone calls do not help, it is time to make a visit.
4. Collect all the necessary information. Before making a phone call, you should collect all the information about customer’s account in order to be well informed about the situation in general and to avoid talking in circles. If you are familiar with the customer’s account, it is easier to control the situation and to maintain the conversation in the necessary direction.
5. Be ready to accept the compromise. Customers can simply find themselves in a difficult financial situation that is why they are unable to pay back the debts. Try to understand their position and work with them in order to get your payments. Otherwise, you are in risk to get nothing at all. Do not demand the full amount to be paid at once, but ask for a lower amount.
6. If all your steps fail, turn to a competent authority. If all your intentions to get your money back are not crowned with success and you just feel you are wasting your precious time, the moment for contacting competent authority has arrived. You can put this case into a collection agency or attorney’s hands. It is better to continue developing your business, to find new customers than just calling people to get your money back.
Non-paying customers can cause you lots of troubles, so you should be ready for the credit management in order to succeed in business.
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