Office inefficiencies make it harder to collect customer debt
A business owner cannot expect to successfully collect customer debt if they don’t have strategies in place and control the collection activities. Here is a list of common office inefficiencies that employees are guilty of when collecting customers payments.
Not knowing who to deal with in a debtor’s business
This is particularly important when dealing with larger companies. In addition, with any business where you exhaust the accounts payable person’s authority to get a decision about when you are likely to receive payment, you need to know the name of the manager or finance officer and ask to speak to them. The Biz Skills course have a form called ‘Credit Account Details’ that lists information such as the person who authorises payment, accounts payable contacts, ordering and delivery details and more. If you ask these questions when the account is set up and keep it up to date, if the customer develops cash flow problems you will know the person to ask for who can make the decisions for authorising payment.
Failure to deal with customer complaints in a timely manner
A lot of businesses put their customer complaints in the too-hard-basket. Complaints need to be addressed ASAP. All businesses should have a complaints policy and all will be individual to each business. The one issue that is common to all businesses is that a complaint needs to be addressed quickly, in a professional and systematic manner; and all actions and correspondence need to be recorded in case the dispute is ongoing or needs to go to legal action. Many customers do not bother to complain; they just leave and buy from your competitors. Research suggests that up to 80% of customers who leave were, in fact ‘satisfied’ with the original business. A business owner’s ability to effectively deal with a customer complaint provides a great opportunity to turn dissatisfied customers into active promoters of the business. If you do not rectify the problems, the customer may refuse to pay the invoice and you will have a difficult time recovering money owed through court procedures.
Lack of persistence in chasing debts
Consistently follow up with the outstanding debts. The older the debt the less likely it will be paid. Consider some of the reasons customers do not pay, such as they are disorganised and they don’t control their cash flow. They either spend too much or don’t collect their outstanding accounts. And then there are customers who do not intend to pay in the first place. They assume that if the debt is small, that it will be too costly to take legal action, and you will just write it off eventually. You need to be able to identify difficult customers and deal with them. Biz Skills courses have a strategy to follow up systematically so you end up training your customers to pay on time.
Failure to apply sanctions (such as COD only) on seriously overdue accounts
Stop credit on any customer who has overdue invoices. According to the terms of trade you have offered your customer, you can put their account on hold. You are not doing the customer any favours by increasing their debt if they cannot pay. Be firm and consistent and make sure you have downloaded the Debt Collection Guidelines from the ACCC.
Not asking for the money because it make you feel uncomfortable
A lot of business people suffer from feeling uncomfortable, or embarrassed when asking for money or negotiating with the customer. They can feel that they might lose the customer or the sale if money is mentioned. People who don’t intend to pay in the first place take advantage of this. Biz Skills courses have a phone script which can give confidence with collection calls and there is a method describing how to successfully negotiate your terms of trade with the customer so they completely understand when you want to be paid. You need to be able to assess the credit risk and that means checking with their referees which many business people fail to do even though they ask for a completed application for credit.
See what the Queensland Business website has to say about business processes and office procedures:
Biz Skills online lecture courses provide the training to improve the procedures required for any business that give credit to customers.
Watch a preview of the Effective Debt Collection Strategies or Debtor’s Ledger Management course. You can also download the details of the course content from the course details pages.