Businesses must keep up with overdue payments, which, of course, isn’t always easy. For many, the process becomes combative, further challenging your team members who are asking for collection of bad debt.
Most business owners understand the stress and frustration with clients who will not cooperate with your policies. Of course, it’s critical to remain professional when dealing with collection of bad debt. One thing to keep in mind is a lesson from the Association of Credit and Collection Professionals: “Assume clients want to pay. Teach your team this mindset to shift the conversation away from combative and toward collaborative.” Let’s review five other tips for collecting overdue payments.
5 Tips for Collection of Bad Debt
- Obtain all information during your consumer’s intake process. Your “new customer” forms should include an email address, a cell phone number, a physical address, and more so you can use these as means of communicating later. You might also consider asking for birthdate and all previous client names such as a maiden name, which may help your collection agency later.
- Client intake forms should also include wording that informs new customers about your payment terms and collection policies. For example, if the balance goes to collections, the consumer is responsible for the collection fee. This gives you leverage for prompt pay settlements as well as recouping the cost of using a collection agency such as Capital Recovery.
- Stay in communication with the consumer during collection of bad debt. First, use emails and calls as a means for corresponding on a regular basis. Then, letters can be the next step to receive payment. Make sure to use time tracking to record all payment reminders that were sent and through which means.
- Don’t let AR sit too long. The older the debt, the lower the percentage dips of recovery success for invoices paid. When a customer bill is 30 days overdue, new steps need to be taken for your business getting paid what it is due. These steps should be evaluated again after 60 days of an overdue bill. Also remember, monitor your business’s credit control. Bad credit affects businesses, not just consumers.
- Use COD methods for recurring a patient when AR is not resolved timely.
Prevent an Overdue Invoice
As they say, an ounce of prevention is worth a pound of cure. Create policies and processes designed to avoid late payments. You might set up automatic or recurring payments, for example. Ask if a client wants to have the bills automatically charged to a certain credit card. You can also rely on meetings, alerts, and regular notifications to reduce the chance of facing a difficult client. Be sure to educate your team, especially the front desk or intake personnel, so that everything operates smoothly.
If not already made, create a uniform payment reminder template such as letter and email templates. Even before an invoice is due, this should readily available. Pay close attention to due dates for certain customer bills in order to map out patterns.
When Clients Won’t Pay Long Overdue Payments
Regardless of your efforts, you will encounter some people who cannot or will not pay their bills and you need to process your own collection of bad debt. This is especially hard for small businesses who are local shops with only one location. At that time, you may consider working with an attorney or a licensed collection agency, such as Capital Recovery. If your business needs help handling the backlog of overdue bills, contact our awesome team for more information.