Posted by: Diane Capuano
In today’s economy, more people are struggling to pay their bills—not just consumers but professionals as well. This means that, as a retailer, you are delinquencies are running higher than they have in the past. In particular, many of your professional painting customers are having a hard time of it, and you may think that expecting them to keep current when they are lacking in business is expecting too much. However, keep in mind that you don’t want to put yourself in a hardship just so your customers can sustain themselves. Your first priority is to you, your employees and the viability of your own business.
Here are some tips for helping to keep your accounts receivable under control.
Keep Tabs
Use the technological tools at your disposal to keep a very good handle on where your accounts receivable stand. Virtually every retail software program allows you to run aging reports to determine the status of each and every account. Once accounts get to a certain level—i.e., 30 days past due—you should start the process of reminding the individual that payment is expected. There’s no need to browbeat or be negative—just a friendly reminder that the account is now past due is all that is necessary at the time. Sometimes this is all that it takes to hear from the delinquent payer. Other times, you will hear nothing back and the debt will continue to age, meaning that more reminders are necessary.
Be Consistent
Use a consistent strategy and timetable for reminder phone calls and follow-up letters when attempting to collect a debt—i.e., 30 days, 60 days, 90 days. Document everything. Be respectful and polite; browbeating is not going to get you anywhere. Eventually, you may wish to consider turning the debt over to a collection agency. According to the website Small Business Notes, this should occur no later than 120 days past due. Sometimes a notice from a collection agency may be all it takes to prompt the debtor to make a payment. Keep in mind that any money you collect via this route will be split with the collection, but at that point, you might feel that half is better than nothing.
Provide Incentives
Also, consider offering incentives for early payment—say, an additional 2 percent discount if the account pays within 10 or 15 days. This at least helps your cash flow with the good-paying customers while you wait for the slow-payers to catch up.
Establish a Policy
Having a clear-cut credit policy at the outset can help keep the necessity of collecting a debt to a minimum. Make sure you do credit checks before offering credit to anyone who walks into your store. Start with a small credit limit and establish a history with the individual before increasing the limit. However, in this economy, those with a history of paying you well may suddenly fall behind. If the customer is someone you know and trust, perhaps you can work out a modified payment schedule that will keep money coming to you, albeit at a slower pace, but at least it avoids the painful and possibly litigious payment procedures that everyone would like to avoid.
Tags: business management, collections
