For businesses, a debt from a customer might simply mean pending, future income, but only if the money is paid in full and on time. Overdue payments spell trouble, which is why a good accounts receivables team is vital to the success of any business accepting payment arrangements or post-service payments.
Motivating clients to pay their bills is an ongoing struggle in many industries. A recent report from the U.S. Census Bureau found that 69 percent of households in 2011 had some form of debt, to a median amount of $70,000. While not all of that is bad debt, those numbers still mean a lot of work for accounts receivables departments across the country in order to keep balances from aging and payment arrangements current.
Below are some tips for small to medium-sized businesses for managing customer payments and keeping their accounts receivables numbers, especially bad debt, under control.
Communicate often and through various channels
Technology makes many things easier, but none more so than communication. For accounts receivables teams, this means more frequent and varied forms of communication to remind customers of their financial obligations. Especially vital is ensuring that any conversation includes verifying all other contact information to ensure you can reach customers when you need to.
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Offer a wide range of payment options
Consumers love convenience and options, especially when it comes to parting with their money. Most payers want to keep up on their financial obligations. Make it as easy as possible for them by offering online payment options, ACH and same day payment options, and even pay-by-phone options without penalties. Autopay is especially convenient for everyone, since consumers won’t even have to set a reminder to make the payment—it’s deducted automatically.
Keep your cool and provide solutions
In accounts receivables, it’s rarely personal. Business professionals have to remember not to get upset with customers, even when they make excuses and fall behind on their bills. Instead, be kind, courteous, and professional. Then, look at the issue as a problem to be solved. Explore options, provide potential solutions, and help the customer believe that you have their best interests at heart. Most will respond favorably and be more willing to make payments, either to bring accounts current quickly or in a timely manner more often.
Offer discounts and rewards for on-time payments
Customers love getting discounts or rewards when they’re meeting their obligations. This provides extra incentive for customers to stay on track with payment arrangements. Offer a yearly discount on the remaining balance for 12 months of on-time payments, a bonus for early payoff, or future discounts with the business for meeting obligations. Little rewards can mean less bad debt and more motivated customers.
Reports and invoicing
Keep track of internal reports and be proactive on invoicing and reaching out to customers. There should be a reminder of their upcoming payment at least a week before the due date and immediately after if a payment is missed. Aggressive interactions are frowned upon, but an aggressive strategy is not—meaning, be nice but don’t let them forget that you’re waiting.
Accounts receivables work is never simple, but the right mindset, strategies, and technological tools can certainly make the job much easier. If the numbers aren’t working in your favor, explore some options for adjusting either your strategy or the tools available to the entire team. For most consumers, if you treat them reasonably and give them options, they will pay.