Delinquent accounts and DSO can really hit small businesses hard. As AR experts, here are our top tips to resolve your delinquent account ASAP (no need to send to collections!)
I. Most Important Steps To Resolving A Delinquent Account :
Contact the Right Person. The owner may not handle billing, the person who finalized the sale may also not handle accounts payable or billing. Find the specific person who handles and direct all communication to them! (Best Practice: This person should also sign the sales contact. More on that here)
Send them a personal note. Does your billing or AR department normally handle communication for invoices? Switch things up by sending the delinquent account an email from the head of your company to catch the customer’s attention. A one-on-one email will soften the overall tone, because it’s a nice, personal touch.
Always note the most recent time past due. With each new phase (30 days past, 40 days, 60 days, etc), make sure you emphasize that their payment is now X days past due in your payment reminder emails. Bold it, color it, the whole 9 yards.
Offer Options. If your delinquent account is more than 90 days past due, it’s time to offer payment options (or connect them to capital, like Kabbage or Fundera). Offer discounts, partial payment or payment plans, or any other flexible option you think may help. At the very least, a payment plan offer email may be the tactic needed just to get the delinquent account to respond to your emails and calls
II. Overview Of Successful Collection Email Tips
You’ll be more likely to fully recover payment from a delinquent account if you follow these collection communication tips:
- Contact the customer immediately after the invoice is past due, and immediately as the invoice enters each stage of delinquency (60 days past due, 90 days past due, 120 days past due).
- Include the appropriate business’ leadership in your correspondence after the initial payment reminder
- Include details about your previous correspondence
- Include the invoice
- Handle each past due invoice separately
- Use the version of your business’ name that is most familiar to the company
- Use your work email
- Call to notify them about the email, or vice versa
- Be polite, empathetic, and understanding
- Regularly update your contact records to reflect any contact detail changes, and the appropriate point of contact
- Record your phone calls, if possible
- Obtain written record of any agreements or payment plan modifications
- Use a Call Script
- Use a collections email template
- Use different email templates for each category of past due invoices
Keeping track of which customers have not paid and why requires a great deal of personalization and fitness. Automating reminders can be difficult when each customer has a unique situation. Recording and tracking all conversations and correspondence is the most important part of collections communication, and leads to dramatically improved success rate. Over time, diligence in communication will reduce repeat offenders, and leave you with a healthier AR. By keeping accurate records you will be able to see if there is a consistent pattern of lateness for some customers, or a particular effective communication technique When using a receivable management softwares can provide analysis of this type, and would make collection efforts more efficient.
III. Overview of Successful Collection Phone Call Tips
The first step is to phone them and follow a script so that you are in control of the conversation. Record the phone call if possible (note: in most states, you will have to inform the individual that they are being recorded). If you don’t have the ability to record your call then you need to take detailed notes of what the customer said and when you can expect payment. It’s very important to follow up via a written record (email), detailing all that was decided upon during the phone conversation, and ask them to confirm. The more detailed proof of any agreements of correspondence you have, the more likely it is that your delinquent account will pay the past due invoice.
How to Have A Successful Collections Phone Call:
- Begin with an ice breaker, including some small talk
- Reiterate that the business relationship is important to you
- Explain that you have plans to improve your business, and need to monitor your income closely to achieve those business goals
- Include the date the invoice relates to
- Include a description of the invoice
- Include the invoice number
- Include the date the invoice was sent
- Include the the date the invoice was due due
- Refer to your payment policies
- Get your customer to commit to a specific date
- Get your customer to acknowledge the past due nature of their invoice (this will eliminate any wiggle room for excuses down the road)
Check out our bootcamp for managing late paying customers or our Action Plan for common late payment customer excuses!