Unfortunately, at some point in your business you will run into a situation where a customer doesn’t pay you. Even if you send the perfect invoice, they may forget to pay, habitually pay late on purpose, or don’t pay at all. No matter what the situation is, always remember that collecting payment is a process of maintaining customer relationships. Next time you are following up on past due accounts, consider the following ways you can collect payment without damaging your customer relationships.

 

Set a payment policy

Make sure you set a policy of how to handle each customer (if the relationships vary), or you could set a policy that applies to everyone, no matter what. Will you call them, or send a paper statement?  Will you always charge a late fee, or only to certain customers you know to be a “problem”?  How often will you call and send statements?  Typically, statements would go out every 30 days.  However, you will want to use your best judgment in this scenario.

 

Communicate Your Policy to Customers.

Make sure your customers understand when payment is due, and what will happen if they avoid payment. You can state your policy up-front in your contract, include your policy in your invoice, or post it on your website. If they habitability pay late, resend the invoice with friendly reminders in advance of the due date to avoid any excuses. If you think the customer is evading payment for a reason, then you may need to take more extreme measures.

 

Collections Agency

Collections are also a process of managing the customer relationship.  You will want to exhaust all options on your own first by calling, sending emails and letters before you start using outside resources. If you are convinced that no typical methods will result in payment, then you may resort to a collections agency.  Before you do, make sure you decide if the amount of money you are due is worth pursuing via a collections agency, or if you should just write it off.  (You probably don’t want to waste your time over a $50 balance due).

 

Small Claims Court

If you are owed a small amount of money, another option is to pursue the customer via your city/county’s Small Claims Court process.  This is often an effective (and cost-effective) way to get a result. However, it is important to remember, that once you start to take legal measures such as these it may damage the customer relationship – so you want to be sure about the course of action.

 

Outsource Accounts Receivable

If receiving, recording, collecting, and managing payments is taking time away from running your business, then you should consider outsourcing your accounts receivable by an accounting firm. An accounting firm would receive your payments for you, collect on past due accounts, and make a deposit to your bank once per week.  While they can usually do deposits more frequently as well, this would obviously take more time and all of these factors are built into the cost of outsourcing.

If you are in a situation where you need to “run to the bank!” the moment you receive a payment, then you may not be ready for outsourcing yet.  If you are comfortable with a weekly deposit, then this may work great for you and take a lot of stress off – you can know deposits are being made timely and accurately.

 

Know When to Let it Go

Collecting payments can be frustrating and critical to your cash flow. If you’ve hired a collection agency and still haven’t received payment, you need to decide if pursuing the debt is costing you more than the actual amount you’re owed. At this point, it’s best to learn what you can from the experience and then walk away. As frustrating as it can be, sometimes it’s best to just let it go. No matter what, always remember remain professional when requesting payment, and never put off calling on past due accounts.