Unpaid invoices are inevitable, especially for a growing business. As you serve more people and offer more products and services, there are more opportunities for clients to get out of payments. This is especially true when you start to offer products and services on credit or payment terms. Offering credit and payment plans can be a great way to attract new customers, but it’s important to extend these privileges to clients wisely. Often, the best way to avoid an outstanding debt from a client is to avoid them to begin with. That requires a commitment to standards from your sales team that supports your entire business structure.
The very first step in avoiding unnecessary outstanding debt is in defining your sales goals, standards, and philosophy. If your business takes a very aggressive approach to sales, your staff may be tempted to take on more risky clients in order to make the sale and reach a goal. However, if you communicate clearly that the ultimate goal is to close quality sales, this can be avoided. You don’t want just any sale, but sales to clients who will complete their payments and return time and time again.
Part of a sales strategy that minimizes risk should be consistent and clear communication. When you are prioritizing quality over quantity, there is no reason to hide or minimize the terms of your payment or credit requirements. Make sure the client fully understands when their payments are due, payment amounts, and interest rates before going into the vetting process to avoid wasted time and missed payments down the road.
When everyone is on the same page about what kind of sales they want to close, the next step is to properly vet clients who are applying for credit or payment plans. When dealing with credit, a credit application is standard. The application is then run through your accounting department or a third party credit screening partner for approval or denial. This process is pretty cut and dried, but this is not the only way that you can offer credit.
In some B2B (business to business) situations, a credit application is more simple and based on income, credit references, and reputation. You may also offer in-house credit where the customer proves their creditworthiness based on income and not credit score. They then pay you directly instead of a finance company. In these cases, it’s important to be selective and mitigate your risk at every opportunity. Require higher income and verify it, call references and ask questions, and charge higher interest rates.
Once you have a credit worthy client and a clear understanding, it’s important to have an airtight contract or agreement. Documentation is one of the most important parts of making sure you get paid for your work in a timely manner. Contracts protect everyone, so make sure yours clearly states what the client is getting, what the price is, and how it will be paid. If you are doing business with another company, you might consider your contract or credit application including a personal guarantee. This is a stipulation that if the company is unable to pay their bill, they are personally liable for the payment. This protects you if a business declares bankruptcy or goes out of business and leaves an unpaid debt.
No matter how streamlined your business strategies are, outstanding invoices and debts will happen. Customers will always experience financial hardships and cash flow problems that cause them to fall behind. That’s why it’s important to have a trusted collection partner like Southwest Recovery Services. We can represent your company in the best light while still diligently pursuing the fair resolution of your client’s debts. Contact us today to learn more about our services!
We make it fast and easy to refer past due and delinquent accounts to our professional recovery agents. You decide the range on what you will accept on each case, and you ONLY pay a percentage of what we actually collect to resolve the case. Ready to get started, or want to learn more? Fill out this form and a dedicate account manager will call you to get started.