In our recent blog, 5 Collections Strategies to Improve Cash Flow, we discussed collections strategies you should seriously consider that will improve your cash flow. One of the most dreaded pieces of that is how to handle client objections to collections.
Most small businesses don’t have a dedicated employee to manage collections – they are typically handled by an office administrator or manager under the catchall category of “other duties as assigned”. As a result, when a payment is overdue, you either sit patiently and wait, or gobble up more of your employee’s already precious time chasing down payments from past due clients. Here are three tips for a better approach.
Anticipate Client Excuses
Track record and intuition tell business owners which clients are more likely to pay. You know best when it’s time to fire your repeat offenders and unleash the collection hounds. However, if this is their first missed payment, you can improve your in-house collection performance by anticipating client responses to your request for payment.
Your staff should always be ready for possible responses when you call a client who has a past due bill. Here are the common excuses and some answers that can help your collections:
Excuse: “I’ll give you a partial payment now.”
Response: “Great, may I ask why are you only making a partial payment? When can we expect to receive the balance?”
Excuse: “I’m having a short-term cash flow problem. We’ll pay you in a few weeks.”
Response: “No problem, we want to work with you. Can I send you an Ezi-Debit form? We’ll hold it until the promised date. This way we both save time on getting this resolved.”
Or, Alternative Scenario
Response: “How bad is the situation?” “Can we enter a repayment schedule and get a little bit each month?”
Excuse: “I’m not happy.”
Response: “What do we need to do to make you satisfied and close out your balance?”
Excuse: “I didn’t receive the invoice.”
Make sure the person making the calls has the billing information at their fingertips so they can tell the client when the invoice was sent out.
Xero has the ability to email invoices in real time and allow clients to view invoices and attachments (such as expense receipts) online through a portal. Give the person making the calls access to the screens needed to send another copy of the bill.
Follow the 3 F’s of Collections
By planning your phone script for handling late payments, you are more likely to engage in a professional and direct conversation, however, it takes more finesse than simply regurgitating a script. You must also follow the three F’s of collections – be Friendly, Firm and Focused.
This means you need to be a good listener, immediately follow up on the client’s concerns or requests, and never end the call without securing payment or a commitment. Being polite, prepared and responsive tells your client that you are just as serious about providing customer service as you are about getting paid.
Automate Invoicing & Payments
The easier the payment method is the quicker your clients are most likely to pay you. Bringing a great experience to your clients from beginning to end should be a high priority for every business. A difficult or technical payment process will only encourage those who owe you to put it off for longer. So if their preference is to use Ezi-Debit, Stripe or PayPal, then why not let them!
Adding payment services directly to your Xero online invoices gives your clients more ways to pay you. Xero data shows that clients with a ‘Pay Now’ button to take credit card payment with Ezi-Debit, Stripe or via Paypal can get paid up to twice as fast as invoices without a payment option.
This system automates billing, collections, and even cash application. It reduces both the amount of time it takes to get paid, and your accounting fee, so you can put that time and money to work elsewhere.
You’re also making it easy for your clients to pay their bills; plus, you’re eliminating a week of float while you are waiting for the payment to arrive. By using a Payment Solutions with existing clients, we’ve seen Debtor Days Outstanding at our clients drop dramatically. The saving and lack of distraction by having cash in hand justifies the small investment you have to make to get it up and running.
To learn more than just collections to improve your cash flow, contact us at www.alltradesbookkeeping.com.au to implement Best Practice Cash Flow Best Management.
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