Dear Clients ARM,
I own a small business and the thing that scares me the most is chasing down money that’s owed to me on delinquent accounts. I’ve read your blog for a while and I know that you say every business will deal with past due accounts at some point. Is there any way that I can stop delinquent accounts from happening in the first place?
Confused in Connecticut
Thanks for reading the blog. We really appreciate that. Yes, we’ve said numerous times that businesses will experience delinquent accounts at some point. The only way it doesn’t happen is if a business doesn’t have more than one or two clients who always pay in full before they receive their services. Of course, just having one or two clients isn’t really a viable option to pay business and living expenses. With growth comes risk. So, outside of not growing your business past one or two customers, there are some things you can do to minimize the risk of delinquent accounts.
Have a Good Credit Policy in Place
If you plan to offer credit or payment plans for your services, make sure that you have a good credit policy in place. If you’re extending too much credit, you’re putting yourself at risk for delinquent accounts. Check out this post on credit controls and if you have questions, give us a call. We can help.
Start the Follow-up Process the Day After Someone Misses a Payment
There are all kinds of reasons that someone may pay late. It could be that they never received their physical invoice or their electronic invoice went to their spam. It could be that they forgot. It could be that they’re having temporary financial problems. It could even be that they’re upset with you about something that happened. One of the best ways to stop accounts from becoming seriously delinquent is to start the follow-up process the day after a payment is missed. Just pick up the phone and give them a call to remind them about the payment. They’ll usually express shock that it is due (because they forgot) and offer to pay you over the phone. They may tell you that they’re upset. You get the chance to fix the problem so that you can get paid. This step is important because the longer an account is past due, the harder it is for you to get paid.
Offer Convenient Payment Options
Just a few years ago, small business owners balked at the thought of having a credit card processor because of the fees involved. Now, though, there are several options for businesses to get a free processor they can use on their smart phone or tablet and they only charge a nominal fee. Your accounting software may offer online payment portal access that your clients can use to pay you faster. Look for payment methods that accept debit cards, credit cards, e-checks (ACH), and your clients should know whether you take cash. Offering convenient payment options can also help you get paid.
Have a Collections Plan
Yes, we know that you want to avoid delinquent accounts. While you can reduce the likelihood of facing them, they could still happen. So, you need to have a collections plan in place. This should include if you’re going to practice first-party collections on your own or outsource. Clients ARM provides both first-party and third-party collections options. We have a collections rate of better than 90% and we would love to help you should the need ever arise.
To learn more about our collections services or any of our other services, schedule your free consultation.