Staying on top of the relationships that you develop when extending business credit is paramount to continuing to get paid on time. We work with innumerable clients every year that find their debt collection efforts in court, where a well managed receivable program could have mitigate risk, strengthened client relationship, and kept a significant amount of collection action out of court.
Based on our experience as one of Florida’s largest, and oldest debt collection attorneys, helping thousands of businesses collect the money they are owed, we continue our series on actioning a proper Accounts Receivable Program.
Following Up on Payment Terms
1. Keep Track of Existing Customers
Checking new customer credit is not enough. Credit situations change over time, and it is important to monitor the credit of long term clients as well as new.
2. Respond Quickly to Credit Issues
If you discover markers for credit problems on new or existing clients, move swiftly to suspend credit. Protecting your cash is paramount to protecting your company.
3. Have a written plan of action for dealing with credit issues.
Your Receivables Department should have a written action plan for how to deal with problems in a clients credit report, faltering payments, and any other milestones that indicate a potentially volatile situation may be approaching.
4. Communicate your credit problem action plan to all employees.
This should go without saying, but an action plan, that is not actioned by your employees, is not an action plan, but a recipe for disaster. All of your employees should be on the same page with the process of working with customers and clients where credit problems have surfaced over time. Consistency is the key to keeping those clients, and protecting your cash flow.
5. Create a risk/reward ranking system for clients.
The easiest is COD, Introductory ,Standard,and Flexible. Customers start at one end of the spectrum, and through consistent payments and expanding business relationships, earn their way to the top of the spectrum.
6. Keep customer information up to date.
“I didn’t pay because I didn’t get the bill. Why did you email it to Mary Joe, she left months ago.” Don’t find yourself in this position! Routinely contact clients and validate all of the information that you have in their contact file, including address, fax, contact people and the like. Train your receivables people to “make the rounds” with all their receivable clients. This has the added benefit of increasing contact with your client or customer, and unearthing opportunities to expand your business relationship.
7. Don’t Keep it “Just Business”
Send Holiday and Birthday Greetings. Make note of other personal occasions like births, anniversaries. Keep in touch, and nurture your relationship with the customer/client. Not only does this cement the business relationship, but when a client is in tough times deciding who to pay, you want to be the creditor that has a relationship, not the creditor that is a simple envelope and a bill.