Can’t pay, WON’T pay?
Do you have customers who won't pay what
they owe you? Do you have problems collecting on accounts that are past due? Here are
some guidelines that can help you know how
you can deal with those unfortunate incidents
when your customers don't quite live up to
their agreements and they won't pay you what
they owe to you and to your company.
1. Protect yourself before you even run
into problems
The first place where you should start when it
comes to problems with customers is before
they even become customers. It has become
common to run credit checks on new customers, so you shouldn't feel awkward about asking potential customers to fill out a formal
credit report. Also, you should make all of
your payment requirements, your prices, any
extra fees, and due dates absolutely clear
with any new customers so that everyone is
on the same page in terms of payment.
Customer Relations
Page 9
focus on acquiring the right customers and
better segmentation of existing customers
to enable individual assessment of circumstances. Both are easier said than done,
3. What to do if initial attempts are not sucof course. Decessful
regulation and
the ease of
If a customer still does not pay after you have
switching supplimade a polite phone call or two, then it is probably
ers has put prestime for you to contact a third party agent. The
sure on compamost common third party agent for retrieving paynies to maximize
ment due is third party collection agencies. These
customer acquicollection agencies generally charge a commission
sition. The danon money collected. Some collection agencies
ger is that this
charge a flat monthly fee, also.
overlooks the
If the amount of money owed is significant, then
fact that the best
you should contact a lawyer.
time to carry out an analysis of customer
payment records and disposable income is
If you feel that it is appropriate, and you do not
at the very start of a business relationship.
intend on keeping this customer, then you might
want to consider filing a claim in small claims court. Do this and it becomes possible to match
the customer. This call should be made by your
accounts receivable department, or your secretary
or another party.
service levels to customer needs, cutting
4. What you should not do with customers who
off many debt-related problems at the
won't pay
source. The second element is being able
You should also make sure that all of the lists
There are several things that you should not do
to work out which existing debtors could
of fees, services, due dates, and charges are
when customers do not pay. You should not
pay and finding ways to encourage them.
put out in writing. Give the customer a copy of
spread the information around. You also should
This can be done by analyzing publicly
the contract and keep a copy for yourself.
not harass the customer. You cannot threaten the available data on customer’s income levInclude in the contract a section that clearly
customer, and you cannot abuse the customer by els and their known outgoings on services
outlines ramifications and steps that will be
making too frequent phone calls and showing up at like satellite or cable television subscriptaken of payments are not made on time. You
all hours. This behavior can get you in trouble with tions, and using it to build collection stratemight choose to have a grace period. Make
the law. This approach also will probably not be
gies tailored to individuals.
this perfectly clear. If you are going to charge
successful.
money on a specific basis as accounts conRising to the challenge
http://www.businessknowledgesource.com/finance/
tinue to go unpaid, make this clear.
what_to_do_when_customers_wont_pay_what_is_owed_0 These kinds of insights will give busiSend out bills routinely and on schedule. Mark 23850.html
nesses the confidence to chase the bad
invoices clearly as invoices and not just a
debtors more aggressively, which should
Understanding more about your customers is
mailing that can be tossed.
result in a reduction in the mountain of
crucial to reducing bad debts.
outstanding debt. It won’t be easy, of
2. The first thing to do after an account
course.
How does your business view unpaid bills? An
due date passes
unfortunate occupational hazard? An intractable
It’s common to see insurance companies
After a customer has passed the stated time
organizational problem? Or simply the cost of doclaiming that they don’t insure bad drivers.
frame in the contract-10 days past due, for
ing business? Businesses can’t afford to ignore the Imagine being able to tell your customers
example-send out a reminder notice. Don't
issue of bad debt any longer. The problem is