Recovering commercial debt poses particular problems for business owners. On the one hand it is critical to ensure invoices are paid on time to maintain cashflow. On the other hand, chasing outstanding debts via a debt collection agency can rapidly sour a business relationship. Unless great care is taken a customer chased for payment can rapidly become an ex-customer.
So what can be done to maintain cashflow but retain existing customers?
Treat Each Client Individually
Business customers fail to pay invoices for a variety of reasons. In many cases these are unfounded; as in the case that companies simply try to avoid paying in order to retain capital.
However in many cases there are legitimate business reasons why an invoice has not been paid.
For example, has your customer experienced a sudden decline in their turnover, which is causing issues with finding the cash to make payment? Has the customer experienced higher-than-normal costs, such as when legal action in being brought against them? In such circumstances an agreement may be worked out, whereby you get paid (in good time) and your relationship with the business owner is only strengthened by your understanding.
Alternatively, is non-payment a result of simple bad management or disorganization? Perhaps your invoice has been mislaid, or incorrectly marked as paid. Are you certain that your invoices are arriving, or could they be getting lost on route? Remember that members of staff leave, email addresses change and digital communication ends up in the spam folder on occasion.
If you’re trying to recover a considerable sum of money it can be wise to investigate the possible causes of non-payment. Not only can such an investigation help to highlight any weaknesses in your own invoicing process, but there is also a chance of “ironing out” the issues and receiving payment more promptly in future.
Cashflow Vs. Retention
Once you have a better understanding of the situation it does perhaps make sense to consider your business priority: cashflow or client retention. If cashflow is the priority, and you’re less concerned about losing the client as you are about getting paid, then a professional debt recovery agency may be in order. Appreciate, however, that being chased for payment in this manner may not sit well with business customers.
On the other hand, if retention is more important you may opt to hold off on chasing. Perhaps a more diplomatic approach is required, and you’re willing to accept late payment in order to remain on good terms.
It should be pointed out here that a business customer that doesn’t pay their invoices may in fact not be a customer. After all, if they’re not paying their bills, are they really an asset to your company?
Consider Contact from the Top
In larger companies, with multiple layers of management, it’s all too easy for senior managers to be distanced from credit control issues. Perhaps, for example, a director isn’t even aware that a problem exists, as you try to battle with his accounts department for months on end.
Alternatively, he or she may be deliberately avoiding the issue, allowing you to go round in circles with the accounts department. Plausible deniability.
Sometimes a conversion – or even one-to-one meeting – between senior managers can help to resolve such issues. Alerting the director of a non-paying customer as to your plight is enough to encourage their personal involvement, and speed up payment.
Best Practise Recovery Firms
Should such actions fail to drive the required payments then it may be necessary to enlist the help of a commercial debt recovery firm. Such companies differ wildly in their approach and outlook, some being far more combative than others.
A small number of agencies focus on industry best practise, aiming to at least begin the process as diplomatically as possible. Sometimes simply having a debt referred to such an agent is all that is required to receive swift payment. Under such circumstances both parties can often save face, and relationships can continue anew afterward.
While it is tempting to recruit the assistance of an aggressive recovery agency, it is important to appreciate that this may create an environment of hostility between yourself and your debtor. Whether this is a price worth paying is a decision only you can make.
While there is no guarantee of payment, such activities as described should greatly increase your chances of invoices being settled – and consequently of improving your cashflow situation. If you are keen to retain a customer after such an incident it pays to put additional effort into the relationship going forward.
Perhaps enquire if there’s anything that can be done to ensure swift payment in the future, or discuss the possibility of reducing monthly fees to ease the burden of payment. The goal should be to rebuild the relationship on an even stronger foundation of mutual respect, with the goal of late payments being a thing of the past.
This article was provided by Vilcol, a professional tracing agent and commercial debt recovery company.