Businesses are dealing with an epidemic of epic proportions.
And no, it’s not COVID-19. It’s collections.
Collecting money owed to your business is tough. Nobody likes to talk about it, but if we’re going to lead well, we need to be prepared to have the conversation.
I remember struggling with collections in the early days of my business. Looking back, I did make some embarrassing decisions such as sending out long emails, getting upset, and shutting people off too quickly.
When businesses don’t pay their bills, it’s usually due to a scarcity of resources that puts a person in a place of embarrassment because they are not doing the honorable thing. In the best of times, people get weird when scarcity and honor are at play.
Don’t go into a collections call unprepared. At best, you won’t get anything accomplished. At worst, you’ll do real damage to the business relationship.
Here is my proven 5-step process you can implement today to improve collections for your business:
1) Do The Prep Work – Get a daily aged accounts receivable report from your accounting department. On a per-customer basis, familiarize yourself with the work that was done, how much is owed, and how far past-due it is.
2) Learn The Customer’s Story – Talk to a person that has the power to make a decision. Don’t disrespect yourself or the other person by wasting time talking with someone that has no authority. It’s embarrassing how many companies assign this difficult conversation to their Jr. payables employee.
a) Make sure you’re in a good state of mind and realize that you are about to engage with a person who has a lack of resources or has suddenly found themselves in a situation where they are unable to keep their word. We’re dealing with a scarcity of resources or a person’s honor. Under normal situations, this causes relationships to be strained, much less in difficult times like these.
b) Bring the emotional temperature down by acknowledging these facts and ask them to tell the story about what’s going on in their business. Listen to their story, really listen. You won’t get anywhere if it’s just transactional business. Write down the main points of their story.
3) Tell Your Story – Ask permission to share what’s going on in your business. Tell them a story of how the unpaid bill(s) are affecting you. Have the main points of your story written out before the call. If at all possible, tell it in a way that connects your story to theirs.
4) Put A Stake In The Ground – Hopefully by this time you are having a two-way human relational conversation. Both parties should be in agreement we don’t want to be in this situation, but this is where we are.
Ask a thoughtful open-ended question to uncover what the triggering event will be that will allow them to pay the past-due bill. Examples might be getting a loan approved, waiting for customer XYZ to pay, or better yet, a specific date that the bill will be paid. Record their answer.
5) Rinse and Repeat – Begin the process again when the triggering event has passed.
I’ve had great success using this system. Last year on 1M of business, only around $300 when uncollected.
When you’re dealing with good people, having a difficult conversation and sharing the struggle will deepen the relationship. Guaranteed.
Things can also go bad, but at least you can have a clear conscience about it.
If the other party is unwilling to deal with you on a human relational level, then it’s probably time to close out the business according to the terms of your agreement. Be willing to pay the price that at this point, the business relationship will have ended and you’ll probably only collect a fraction what’s owed after legal and other costs.
Hopefully, this will help you deal with the collections pandemic of 2020.