Business owners are struggling enough in this weak economy, but when you add stagnant accounts receivables to the mix, it can make for some pretty tough financial times. According to wall Street report, small business owners are having to wait longer to get paid 20 percent more of the time than they were last year. In addition, there have many more business failures, and experts chalk that up to the difficulty that small businesses are having in collecting their past due accounts. These are some of them .
UNDERSTANDING TIMING
There have been many studies conducted on the art of collecting overdue accounts, and professional debt collectors put a lot of stock in the results of those studies. For instance, it’s widely understood that once an account goes past 30 days late, it suddenly becomes slightly less likely that the monies will be recovered. If it goes past 60 days, you’ll have about an 85 percent chance of collections, but let it go 90 days, and the recovery rate drops to a little better than 70 percent. Accounts that are 6 months late have about a 57 percent chance of getting paid, and those that go a year or longer are not likely to be paid at all.
UNDERSTANDING AND WORKING WITH THE CUSTOMER.
There comes a time in many businesses when cash flow just isn’t what it should be, and when that happens, some invoices are set aside to be paid later. Sometimes this problem can be solved by simply calling and talking to the customer. If the customer admits to you that he or she is having cash flow problems, offer to set up a payment plan on the invoice. Sometimes this will push your invoice to the top of the list of those to be paid, and other times, the customer will just appreciate your willingness to work with him or her, and make more of an effort to get you paid.
GET PERSONAL
It used to be that sending a letter asking for payment would many times prompt a response, but nowadays, it takes a lot more to get a delinquent customer’s attention. l should suggest that meeting a customer in person might do the trick. Showing up unannounced at the office, and then offering to wait until the accounts payable manager is free will definitely get some attention — as will showing up at the same place the customer frequents for lunch or coffee, and making a point to stop by and discuss the overdue account.
OFFER A SETTLEMENT
If the customer won’t work with you and make payments on the past due amount, think about offering him or her a settlement. In this scenario the customer would agree to pay you a portion of the overall bill in return for you forgiving the remainder of the debt. For instance, if the customer owed you N100,000, and you agreed to N7,000 on the Naira he or she would pay you N7,000, and you would call it even. When doing this, you should always attempt to collect enough to ensure that your costs are covered, but if the debtor’s situation is dire enough, it may be smart to agree to anything just to recover some of the monies owed.
HIRE A MEDIATOR.
If you’ve tried to work it out on your own with the debtor, but can’t seem to agree on the terms, you might consider hiring a professional mediator.These professionals work together with creditors and debtors to help them reach solutions that benefit them both. If this is the route you choose, be sure to hire a professional who has been trained in the art by the institute of Debt recovery practitioners of Nigeria.
SEND A FINAL LETTER
If you’ve tried collecting the debt yourself, but haven’t had any luck, there’s one more thing you can try before handing the account over to a professional Debt collector. Sending out a demand letter, which informs the customer of your intent to refer his or her account to a lawyer or collection agency, will sometimes spur the customer on to action in order to avoid the related consequences. If you do send out such a letter, be sure to give the customer the date that the payment must be received by you, in order
to avoid having his or her account turned over