Debt – an ugly, four-letter word that is universally understood as a bad thing. Carrying debt without a strategic plan to pay it off is unsustainable and can make for many a sleepless night for families, individuals, and even businesses.
Thankfully, there are ways to protect your business and negotiate clear and effective payment terms to keep your organization’s payments running smoothly. This can also be done while simultaneously creating a positive environment for the customers who are setting up payment agreements.
Here are a few ways your business can create new systems and strategies to prevent bad debt.
Prioritize Upfront Payments
Are your current payment policies set up so customers can pay upfront? While it may sound like a simple ask, asking for money upfront sends a strong message that your organization understands the value of services offered and that you’re serious about payment.
One solution is to organize a direct debit system that allows your customer to pay in advance. This way, customers know exactly what to expect – and so do your employees – and often, a respectful, mutual agreement of payments rendered for services offered can be reached.
Offer Incentives or Discounts
Does your organization currently offer payment terms that incentivize customers for paying on time? Structuring your payment terms to offer a small discount encourages prompt payment, and is a more favorable approach over issuing late fees and penalties for outstanding invoices. By making it easy and worth their time and money to pay on time, both parties benefit.
Settle Payment Disputes Quickly
Another way to help prevent bad debt is to settle any disputes with customers quickly. Often, this is used as an excuse for non-payment, and as a result, your business is unlikely to be paid until you promptly resolve the dispute.
By having a simple way for customers to contact you online, such as a consumer portal where they can submit a claim, these disputes can be resolved more quickly, because it’s in the best interest of both parties to get it resolved.
Maintain Communication with Customers
One of the most efficient ways to prevent bad debt is to maintain clear, repetitive communication with customers.
Client relationships need to be tended to like any other relationship – regularly. We understand that many times, clients have different scenarios surrounding their financial situation. Perhaps they simply forgot the due date for a bill while juggling all of life’s other demands. Or there’s been a staffing change in the accounts, or they are in a situation where they’re financially distressed and will need to negotiate terms.
The key here is to continue communication led with sympathy and empathy, while also remaining compliant with regulations and guidelines set out by the Fair Debt Collections Practices Act (FDCPA). It is possible to negotiate once your organization has all the details needed to resolve the situation and stay on top of regular cash flow.
Rely on Debt Collection Professionals
Partner with a professional debt collection agency to create effective, ethical systems and processes to recover the payments your company is owed. Many businesses choose to work with a professional debt collection agency for all outstanding invoices, handing over this important aspect of their business to a trusted partner to allow them to focus on running their business.
At Capital Recovery Corporation, we understand that in the end, things happen. The pandemic has heightened financial loss for many across the country and even the world. People fall on hard times, and often, they don’t have enough resources or options to help figure out a plan and move forward.