Overcoming common debt collection challenges for your small business

Every size business, whether a small business or a larger organization will have to manage late and non-paying customers. It’s just a reality of being in business and part of the accounts receivable process.

Not every customer is going to pay their bills on time. That would be nice, but it just doesn’t happen for a wide range of reasons. Some of those reasons are legitimate and other reasons will challenge you and your staff.

Keeping current with accounts receivables and maintaining cash flow are constant challenges of running any small business. That’s when a small business needs to decide to implement some form of debt collection activity.

Let’s examine the various challenges a small business faces with late and non-paying customers and how to overcome them.

Urgency and payment expectations

Payment expectations with your customers that are unclear can lead to misunderstandings, disputes about service and price as well as your efforts to implement collection activity. When you fail to manage payment expectations with customers and the urgency around them, that can result in frustration for both you and your customer.

Having proper internal systems

We talk about this all the time here, but it is one of the mission critical elements that we feel necessary to reinforce. If your small business has inadequate internal accounting systems that can only get in the way of your efficiency and effectiveness of getting paid on time. And when it comes time to implement collection activity with customers, it can delay the process even further. Without proper internal accounting systems, your small business may struggle to prioritize customer payments and ultimately manage collection activity.

Breakdowns in communication

Effective communication with your customers is mission critical at any stage of the payment process. However, small businesses often find themselves in situations where communication breaks down. Maybe it’s a lack of systems, an incredibly busy season for your business or simply poor communication channels. These breakdowns lead to delays in payments, strained relationships with your customers and ultimately negative cash flow.

Consumer resistance with payments

The list of reasons why some consumers delay or resist payments can be endless. This is a challenge that any small business will have to deal with regularly and try to overcome. For many consumers, financial difficulties are one of those legitimate reasons why they struggle to meet their financial obligations. In other situations, a consumer may have a dispute over the bill you sent them, and they’ve not only resisted the communication process, but the actual payment.

How does a small business overcome debt collection challenges?

There are many ways your small business can be proactive in your regular accounts receivables as well as preparing for any collection activity.

Your small business must prioritize clear communication

Your small business must have the ability to maintain open lines of communication with your customers right from the beginning of the relationship. That includes outlining payment expectations in clear terms, whether in contracts, agreements or even a one-pager presented to new customers. Structured communication also comes in the form of follow-ups whether that is emails, gentle reminders by phone and good old-fashioned statements in the mail.

Offering flexible payment options to customers

There are several ways you can look at flexible payment options as a small business. First, you can offer many ways for a customer to pay their bill including by mail, on site if that is applicable in your business, and even implementing technology on your website. Flexibility also means understanding that some of your customers may be facing financial challenges. Your ability to accept partial payments or payment arrangements is another way to get your customers current.

Implementing proper accounting systems is a must

If you really want to get serious about your small business cash flow, you should invest in a robust accounting management software system to streamline all your accounts receivables. If you don’t know where to start, sit down with your CPA or bookkeeper or seek professional assistance from a reputable accounting software vendor. Having and using the proper accounting software can be a game changer on so many levels.

Get started with a professionally run debt collection agency

Running a small business means you’re going to have customers that do not pay. So why are you waiting to work with a professional debt collection agency? If you’ve hesitated to outsource your receivables to an agency, now is the time to act. You will notice a considerable difference in the timing of payments and ultimately your cash flow by hiring the right collection agency. Professionally trained debt collectors have the expertise and the resources to navigate all types of complex situations with consumers. And, they’ll maintain compliance with any legal requirements both federal and locally.

Find an agency that understands your industry and offers a low-cost debt collection solution.