When trying to collect money from people who owe your company, you’ve undoubtedly heard these declarations:
- “The check is in the mail.”
- “Give me a call next month.”
- “There must be some mistake.”
What’s the real objective of these delinquent customers? In a word — delay. The debtors are trying to buy time, perhaps hoping that if they wait it out, you’ll no longer have the patience or desire to pursue the claims. They figure your company will ultimately write off the account as a bad debt.
Industry data shows the probability of debt collection drastically diminishes after 90 days. So non-paying customers who play the waiting game know that by holding you off, they’re improving their chances of getting off the hook.
In any creditor relationship, debtors usually have the upper hand because they know when — or even if — they’ll pay. Consequently, they can take steps to evade or forestall your collection efforts. Is there anything you can do? Yes!
Gain the upper hand by minimizing the risk of loss, or removing risk from the equation altogether. Simply require the customer, in writing, to be contractually responsible for all related costs if the account is placed in collection or goes to litigation.
Take this step at the outset of a relationship before extending credit to new and unknown customers. Make sure it’s clear. By shifting the cost responsibility to your customers upfront, you make them think twice about ignoring your billing statements.
Talk with your advisor about strategies that may help get your customers to pay more quickly.
If the customer is a business, their commercial credit is a matter of public record. You can contact Dun & Bradstreet, or any of the three major credit bureaus for information before you extend them credit. If the customer is a major corporation, their annual reports may be available for inspection through their public information office.