Monday, May 9, 2011

Make Payment Arrangements with Past Due Customers

There are many reasons customers can't pay their invoice on time. If a customer is late and you contact them, or they call you, there is definitely a right way and a wrong way to handle the situation. When working with our clients, Transworld recommends that you keep control of the conversation at all times.
We recommend that you ask for your money using this 3 step process:
  1. Sympathize: (shows compassion) "I know how you feel, that happens sometimes." (This will defuse any possible anger and catch them off guard) 
  2. Remind the debtor of their obligation: (when the money was due), "Mrs. Smith your account balance of $200 was supposed to be paid on  _________ date. (This can possibly cause a little guilt on their behalf and have them realize you are right in asking for the money.) 
  3. Ask them:
    • “Mrs. Smith will you be taking care of this today or tomorrow?”
    • “Mrs. Smith will you be paying with cash, check, or credit card?”
    • “Mrs. Smith of the $200 that is now due how much are you short?”
      • If they say they are short half, "Okay Mrs. Smith, lets do this, I need the $100 you have now. I’ll mark it on my calendar that your check/money order should be here on __________. Now, how much time do you think you need to take care of the balance? Do you get paid weekly or bi-weekly?
      • If they say they are short the whole amount, you are still in control. Now you can dictate payment terms.
This is how NOT to respond when a debtor says they can't pay in full:
  1. How much can you pay?
  2. When can you pay?
  3. Can you pay something? 
Asking these questions gives control of the conversation to the debtor and allows them to make unreasonable suggestions such as “$5.00 per month” (We have clients that in the past accepted $5-$10 per month on a two or three thousand dollar balance!).
Instead, state what you are willing to accept in the form of two options: 
  1. “I can either settle your account for _____ dollars in the next 30 days or you can start making monthly payments." 
  2. "You can do a payment of _____ dollars per month for the next 2 months or _____ dollars per month for 3 months.”
This will force the debtor to choose the option they like best or make a counter offer.  Either way you forced them to begin negotiating payment terms.

Brian A. White
Senior Cash Flow Consultant
Transworld Systems NGA WDDA

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