Dealing with Difficult Clients

Working with Troubled Clients

As you're probably aware, making a sale doesn't automatically mean you've received the cash. It's only cash when you get the money. That's why pursuing late-paying customers must be one of your business's highest priorities.

Late-paying customers usually fall into three categories:

• Customers who want to pay but, because of real financial problems, can't do it on time.
• Customers who prefer to delay or juggle payments, and
• Customers who will do whatever possible to avoid any payment.

For the first two categories, there is hope. You may be able to manage these debts and to convince the debtors to make partial or full payment. This is especially true if you have customer loyalty and your customers sincerely want to support you. As for the last category, you need to recognize this type as quickly as possible and take serious action—perhaps turning the account over to a collection agency. Below, we'll help you analyze your customers so you can separate a deadbeat from a struggling account that deserves some slack.

Most professional bill collectors agree that payment problems are solved by effective communication. Getting paid can even be viewed as an element of your marketing plan. If you can work with financially troubled clients, as they make their way through a rough patch, you may end up with devoted customers for life.

• Get busy and stay at it until you're paid.
  According to a survey by the Commercial Collection Agency Association, after only three months, the probability of collecting a delinquent account drops to 73%. After six months, it's down to 57%. After one year, the chance of ever collecting on a past due account is a dismal 29%. Whether times are good or bad, you should always follow up receivables promptly. If you give 30 days, on the 35th day you should be on the phone. That's a rule that doesn't depend on the business environment.
• Accept electronic payments.
  If you are not accepting credit and debit cards, now is the time to establish an electronic payment account. Accepting credit and debit cards can speed the payment period to 4-5 days (instead of 30-60 days). And in a difficult business environment, an electronic account guarantees payment and reduces the risk of default.
• Don't harass debtors.
  It's rarely a successful strategy and it's sometimes illegal. If a customer asks that you stop calling, then stop calling. If a customer asks you to call at another time, find out the right time to call, and call then. Don't leave more than one phone message a day for a debtor, and never threaten the debtor or leave messages that describe the debtor in a bad light.
• Look for creative solutions.
  If the customer has genuine financial problems, ask what amount they can realistically afford. Consider extending the time for payment if the customer agrees in writing to a new payment schedule.
• Write demand letters.
  Along with phone calls, send a series of letters that escalate in intensity. You can find sample collection letters (sometimes referred to as “demand letters”) online. You can also pay a collection agency a fixed fee to write a series of letters on your behalf.

Source: SMEToolkit