It is important when establishing a collection strategy to encourage your collection representatives to remain proactive. Catching a customer who will become a struggle to collect from before it happens is the best way to keep your accounts receivable on track. There are often subtle signs that you should help your collections representatives learn to recognize when a customer is headed towards nonpayment. Below are a few collection strategies to help you remain proactive.
In order to be able to pick up on the subtle signs of future nonpayment, you have to keep in touch with the customers. If you are only contacting them via email to send them their monthly invoices, chances are you won’t know what is going on in their finances. Pick up the phone every now and again to alert them to an invoice and make conversation. The more they see you as a friend and partner, the more they will open up.
There are a few signs that a company is struggling with their finances, which will alert you to whether they will slip on your payments.
- If a company is only paying smaller invoices and not larger ones, this may be a good indication that they are struggling to make payments.
- Keep track of how long it typically takes a customer to pay. Set up alerts in your accounts receivable software when a customer starts to slip and pay later, this is a good indication that they are struggling.
- When a customer is struggling financially, they will feel an obligation to pay those they see as a business partner rather than just another vendor. This is another good reason to keep up with regular reviews and keep yourself on your customer’s side as a partner.
The sales department shouldn’t drop out of view as soon as the sale closes. The sales department should be conducting their own regular reviews to ensure the customer is getting everything they need and are satisfied. The sales rep the customer worked with most during the sale often creates a good relationship and the customer is most likely to feel more relaxed and open to talk about company issues, turnover and other financial related topics.
Keep an ear to the ground about your customer’s company and industry updates. If you deal with a lot of companies in an industry that is struggling with demand, you will want to keep an eye on those accounts. If you have customers in a country that is currently struggling economically or is becoming unstable, you will want to reconsider that relationship. You will want to give customers a call if you hear talk of acquisitions, mergers, change of leadership or other big impacts. All of these could affect how soon you see payment.
If you’re keeping up with changes and signs and remain proactive on your accounts, you can likely avoid a big nonpayment from a customer. Even those that are the best customers can experience a shakeup in their company, so it is always important to stay in contact and know what is going on with your customers.