If a large customer comes to you and shares their financial problems, it is time to open up your ears and hear them out. You should be happy they are discussing these issues with you. The fact they’re coming to you with this problem is huge considering many companies either do not realize their trouble, refuse to admit they are in distress, or are in denial of their financial burdens. Now that they have come to you, your company has a unique opportunity to strengthen your relationship and help your customers out, basically cementing your relationship with them, not to mention the potential referral business they will give you. But that is all dependent upon how you handle the conversation and the actions you choose to take as well as monitoring your customers to see these situations coming so you can take corrective action before it gets to this point.
SO WHAT CAN YOU DO?
Deal directly with your debtor and try to work out a payment plan and Keep things out of the court when possible. This customer came to you for help, they obviously want to pay their bills but just can’t at the moment. It would be different if they were ignoring their problem and your collection efforts. Ask them how they plan on getting back on track. How do they plan on reducing their overhead? If they have a firm business plan and are proactively handling their situation, then they are more likely to get through this rough patch and pay you what they owe.
But how do you avoid this situation in the first place? Here are a few things you can keep an eye on:
- Stay on alert for customers who may be falling into financial distress.
- Look into their relationships with their lenders.
- Monitor their payment patterns.
The third bullet, monitor their payment patterns is one of the most effective ways to decide if your customers are in financial distress or headed towards it. Unfortunately many companies use spreadsheets, aging reports, and highlighters to help them in collecting accounts receivable which makes monitoring payment patterns more difficult and time consuming. So your staff will probably kick that practice to the curb as more important duties will take precedence over analytics and customer history research.
There are AR management systems out there, such as Lockstep Collect, that will help make monitoring payment patterns and other AR activities easier and faster than ever before through automation and advanced features. Another way to ensure you are collecting accounts receivable in a way that will help your company get paid faster, is by putting in place a solid credit and collections policy and action plan.