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For the sake of your company's bottom line and continued good relationships with good customers who fall behind on their bills, it's important to know what condition their finances are in when things go wrong.
That way, when circumstances change and some of your customers become hard pressed to make payments, you can tailor your approach to their individual needs. If you can modify your accounts collection process to match the financial scenario, you will be able to keep your best customers happy and preserve your business relationship.
Here are four typical scenarios that cause good customers to fall behind and strategies you can apply to help get them back on track:
1. Stuff happens. Sometimes the unexpected occurs, creating a cash crunch for your customers. You know they've kept their word in the past and that they are likely to pay up when they can resolve the bad situation or it passes.
Work with them to come up with a payment plan and a commitment to follow it.
2. Red tape. Before some customers can cut a check they have to jump through a series of paperwork hoops.
Learn what systems they use and discuss ways to speed payment by sending invoices immediately to the right people. E-mailing bills can also help in these situations.
3. Special bonds. There are some customers who pay you before anyone else simply because of their relationship with you or one of your employees. In their minds they are paying a person, not a company. Perhaps you helped them when no one else would and they remember that gesture.
You know which customers fit in this category. They deserve special treatment if they ever run into trouble paying so you don't damage the rapport.
4. Poor judgment. The worst-case scenario is when the customer simply can't pay. The situation arises either because your company didn't do its homework ahead of time or some critical unplanned factor changed the customer's circumstances significantly.
Don't worry that other creditors will also start banging on this customer's door, worsening your prospects of collecting. Beef up your collection efforts and try to work out something quickly. Without a speedy resolution, you risk a complete loss.
The key: To improve your collection rate, avoid lumping all your customers into one category. Treating them all as numbers weakens your efforts to keep your company's own numbers in the black.
*Securities offered through 1st Global Capital Corp. Member FINRA, SIPC. Investment advisory services offered through 1st Global Advisors, Inc. We currently have individuals licensed to offer securities in the states of AL, AZ, CA, CO, CT, FL, GA, HI, ID, IL, IN, KY, MI, MS, MO, NV, NJ, NC, OH, RI, TN, TX, WA, WV and WI. This is not an offer to sell securities in any other state or jurisdiction.