Debt collection is a painful but necessary function. And while slow-paying customers place enormous pressure on your cash flow, you stand a very real chance of losing them as customers forever if you, or your accounts team, handle the matter badly.
Of course, no small business can afford to hang onto consistent late payers or clients who refuse to pay, but these are usually the exception, not the rule.
Eugene Schalkwyk, director at INOVO, a company that specialises in contact centre optimisation, highlights a few things you can do to maintain good relationships with your customers when you collect debt, to ensure healthy cash flow as well as long-term loyalty.
Ensuring that your customers are treated with respect and offered practical assistance at all steps along the way. This could mean the difference between keeping or losing them for the future. Remember, your business is here today because of your customers.
If you have an accounts team or contact centre agent handling your debtors, your clients should be divided up based on personality profiling and should be routed to the correct agents based on these profiles. In the early stages, you or your agent should have a softer approach to the customer compared to later on in the process.
Training is crucial when it comes to those making calling to collect debt. It does not make business sense to risk a long-standing or promising business relationship because a disinterested, insufficiently trained person picked up the phone to contact a client about their overdue account. After all, there is every chance that the customer is going to pay the debt and buy more services. To improve this interaction consider:
- Recording conversations in order to highlight any problem areas. This allows managers to monitor the duration of calls and the effectiveness of interactions when it comes to debt resolution.
- Training can be done while agents are at their desks, so they can improve their product knowledge and skills without having to leave their work environment.
- Scripts can be improved upon to better articulate the company’s message, and, in debt collection, this can provide an opportunity for empathy as well as closure.
- Processes can be automated and intelligence can be applied to call routing in order to prioritise callers based on who is more likely to pay. Those callers are then forwarded to the agents who will then have a higher success rate.
Listen to them
There’s nothing worse than feeling like just another number, particularly if you are a long-term customer. An overdue account is no reason to ignore a business relationship built up over the years. Offer customers the chance to share their thoughts, opinions and complaints in order to improve your customer service offerings and resolve problems in the debt-collection process.
- Get your customers to provide feedback by rating customer service and use that information to identify problem areas.
- Provide self-service options that address the issues so that the customer can be empowered in resolving their problems.
- Listen and act on problems raised.
Build customer loyalty
Just because a customer owes you money, doesn’t mean that they are no longer loyal. They may be a long-term fan of your business, and their word-of-mouth referral will always be valuable. Making the process of debt collection less painful will at least ensure that you retain a positive relationship after the process. Even better than that, should the debt-collection process be successful, you may retain the customer, too.
Make it easy
Take detailed notes on all your interactions with your customers and record things like when they say they are likely to be able to pay and how much they plan to pay at that time. This will help you identify which customers are likely to pay and when. Broken promises-to-pay should receive higher priority as well and you may even have to close their accounts. This customer profiling is important as first time defaulters should be handled differently to repeat offenders.
4 Steps to effective debt collection
According to Accounting and Tax Club, there are four prongs to an effective debt collection strategy:
- Collections should not be delayed. Even if it seems fair to allow time for a customer to service debt, that customer should be contacted on the thirty first day of default. This helps to ensure that contact information is current and all other information regarding the debt is up to date.
- Date the repayments. The employee should get the customer to commit to paying up or towards the debt on a specific date. This date is then used to persuade the customer to live up to their own commitment.
- Develop a system for follow-up calls by recording all contact times and commitments made and then make those follow-up calls regularly so that the indebted customer is not forgotten about. If you don’t do this, it’s easy to forget about debts and, ultimately, may lead to writing those debts off.
- If the customer is not receptive and does not offer any commitment in terms of servicing debt, remind the customer that the business will have to institute a formal collections procedure that may even lead to court action. Although this is an unpleasant course of action to take, it displays that the company takes debts seriously and that it expects them to be repaid, no matter how small.
Done correctly, debt collection can be streamlined along with all the business processes that enhance customer service.