Worried about timely payment of your accounts receivable? Never underestimate the importance of a reminder letter. Try the ‘I want to help’ approach before considering a collection agency. One of the biggest headaches for any small business is the payment collection challenge.
If you have planned and worked out which customers are good credit risks, and have offered them payment terms, you may then be concerned about further late payment. So you want to employ the most effective tactics to encourage on-time payment. Are you prepared to ask your customers to pay their bills, or do you leave it until payment is late and decide on an approach then? Payment reminder letters are always helpful as a tactic prior to any form of late payment.
Consider all of the possible reasons for late payment. Look at the payment history of each customer and professionally write responses for every situation. Remember, your relationship with your customer is what is most important. So always think about not only collection of outstanding invoices, but also about how tocommunicate in the most effective manner.
- Does your customer normally pay on time, and is this an anomaly?
- Is there a history of late payment with blatant disregard to timeliness?
- Do you have new customers who are not used to your payment terms?
- Is it possible your customer is unable to pay the bill?
Whatever the reason, each letter should be crafted accordingly, with stronger language for those customers who simply disregard the date and pay when they have the cash flow, using you as their line of credit. But do you stop at one reminder? Absolutely not, keep those letters flowing until you get some form of response, altering the language of each reminder accordingly. In the most of dire circumstances you may need to employ a collection agency. Collection calls may also be a necessity once payment really is late.
Decide upon your company approach when it comes to letters, and try to be consistent. It never hurts to send out those reminders a few days before the invoice is due for payment, using a polite, personal tone. Make sure your letter targets the correct individual within the company and that your language resonates with that person. Does that person have the power to make the payment happen?
It pays to be aware of the usual excuses, and combat those excuses head on in your correspondence. Many of the most common excuses include:
- We have cut the check; the payment is in the mail
- Our system is complex; you need to work to our schedule
- We have not received payment from our customers
Don’t be intimidated by your customers, and stand your ground in a calm, polite and helpful manner. It also makes good business sense to make sure you follow your own advice, and pay your bills on time, it also makes it easier when dealing with late paying clients!
Remember, if you decide to use an invoice factoring company to generate working capital for your business by using your accounts receivable as collateral, the collection headache goes away. Bay View Funding offers professional receivable management so you don’t have to worry about those reminder letters or collection calls.
