Chapter 4, from ” The Small Business Survival Guide” By Ray Silverstein.
Creative Collection Strategies-How to get payed, when your client doesn’t want to
How do you handle delinquent accounts? If you rely on collection agencies or attorneys
to collect on your behalf, you’re probably not getting very much back from their efforts. Plus, you’re paying a third party to do the work, which means less money ends up in your pocket. Why not cut out the middleman and try some of these strategies instead?
1. Have a Heart-to-Heart Meeting – This is especially effective when you have a good relationship with the delinquent customer. Instead of politely wondering and worrying from afar, insist on meeting face to face. Find out why the customer can’t pay. Go there with the goal of setting up a workable payment schedule.
Getting paid, even if you get paid slowly, is better than not getting paid at all. Give your customer the chance to do the right thing. You’ll improve your chances of getting paid and strengthen your relationship at the same time.
2. Employ Humor and Charm – Sometimes, it pays to get tough with past-due accounts, but sometimes you’ll get better results by turning on the charm. As the saying goes, you’ll catch more flies than honey than vinegar. For example, one of the entrepreneurs in my peer groups writes “love” poem to his delinquent customers, like this:
“Roses are red, Violets are blue, When will I receive payment from you?”
He’s also been known to send along flowers or candy to the person who approves payments. And guess what? These strategies, though very simple, have worked for him repeatedly. Sometimes, it’s more difficult to ignore someone who’s being funny and friendly than it is to ignore someone who’s unpleasant and demanding.
3. Accept Payment in Barter – Think outside the normal payment process. Does the customer have something—a product, a service—that you can use in lieu of cash? Barter is the world’s oldest way of doing business, and it’s still effective, as we discussed in the prior chapter.
4. Take a Credit Card – If your company takes credit cards, suggest the customer transfer her balance onto one her credit cards. Then, she can take her time paying it off to her credit card company. It gives her more breathing room, but, more importantly, makes it the credit card vendor’s problem, not yours.
5. Offer a Discount – Again, something is better than nothing. Offer the customer an instant 5-10% discount in return for immediate payment. Look at it this way: the discount dollars are more than offset by the time, energy, and “headspace” you’ll save yourself in collection efforts. And it’s less costly than using a collection agency.
6. Take It Back – If the customer still has some of your merchandise in stock, offer to take it back. This not only shrinks the customer’s bill but your potential losses.
7. Be a Squeaky Wheel – Make a pest of yourself with frequent phone calls, emails, and letters. If you start getting on someone’s nerves, they may bump you up on the priority list just to get you off their back. Also, take your complaint to the highest level of the company. Management may not know what’s going on or may not want to lose face.
8. Get Tough – No business can afford to be blacklisted by an entire industry. If you just want to get paid (and don’t care too much about nurturing a future relationship), threaten to tarnish the customer’s name by broadcasting its delinquency. If your industry offers a vehicle for sharing customer payment information, participate. (For example, credit managers in some manufacturing sectors regularly pool their data.) For one thing, it’s a good way to put some teeth in your threat. For another, it can help you steer clear of future deadbeats.
9. Cut Them Off – If you’re a critical vendor to the account, refuse to ship additional product or supply services until you are paid. I know companies that have taken new
, and then hold back on delivery until the customer needs the product. At that time, they demand full payment. The question becomes: who has the leverage?
10. Mechanics Liens- If your industry has mechanics liens, do not hesitate to threaten to file liens, or actually file them. This may put pressure on the developer, general contractor or owner of the property to pay you.
In other words, don’t limit yourself to traditional collection strategies. Be creative, and
adjust your approach to suit each particular customer. With some, understanding and empathy works. With others, you need to play hardball. Do whatever it takes to make sure you get paid.
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Email:
ray@propres.com
