How to Collect Late Payments Without Damaging Customer Relationships
The most common problem that many businesses face is how to collect late payments. Late payments are a serious issue for any business, but the impact can be especially devastating for small businesses where cash flow can fluctuate from week to week and month to month.
In order to make sure you don't damage your relationship with your customers in the process of collecting overdue balances, it's important to do so in such a way that doesn't alienate them or leave them feeling like they're being taken advantage of. The following tips from CFO Masters should help guide you through this process while maintaining good customer relations.
TopTips for Collecting Late Payments Appropriately
Don't be a bully
It's important to not let your internal frustration take over the conversation. If you've been putting up with late payments for months and suddenly they're overdue, it can be easy to come across as confrontational or rude. Keep in mind that this is a customer you want to keep happy, so remaining calm will help to put them at ease.
Be the voice of reason
It's not uncommon for a customer to feel like they've been cheated or taken advantage of in some way when they get their statement. Your job is to help guide them through this issue and let them know that it's just part of doing business. Try to be as compassionate and empathetic as possible.
Create a plan for making payments late
If you have a customer who typically pays late, try to work out an arrangement with them in advance. This can be especially helpful if they are willing to pay more per month than what the minimum payment amount is on their statement. Helping your customers avoid late fees and high interest rates can be the difference between keeping them as customers and losing them.
Don't overstate your case
Once you've explained to the customer why they are late, don't push any further. If a customer is already stressed out about how much they owe, adding further pressure could end up causing significant damage to your business relationship. You're likely to get much further by being lenient and understanding than you will be trying to rush your customers into paying up.
Incentivize early payment
The best way to avoid late payments in the future is to make it less of a burden for your customers when it comes time to pay. One way of doing this would be offering discounts or freebies for paying early. This will incentivize your customers to pay on time, which in turn is good for both of you and the health of your business relationship.
Why it's important for your business to get paid promptly
When customers pay you in a timely manner, you can estimate how much cash you have coming in, which will help you make important decisions. This can include things such as making purchases or scaling back on expenses. In short, it will help you stay informed about the financial health of your business, which, according to Zenbusiness.com, is essential so that you can make smart choices and identify potential problems.
When customers pay late, there is a delay between when you provide a product or service and when you get paid for it. This means that even if your company makes enough sales to cover expenses during this time, you might not be able to pay your employees and other costs. The lack of a steady cash flow can make it much harder for you to run your business successfully or plan ahead.
It's important to collect late payments without damaging customer relationships. The tips provided should help you get started thinking about how you can do this in a way that increases customer loyalty and not diminish it. Hopefully, this article gives you some confidence and insight into collecting late payments in the best way possible. And if you need further help in scaling your business the healthy way, see what CFO Masters can do for you. Call (866) 627-3776 today.