Debt Collection – How to Get Customers to Pay Up (Part 1)

“Being on par in terms of price and quality only gets you into the game.  Service wins the game.’ – Tony  Alessandra 

If you want to make things happen the ability to motivate yourself and others is a crucial skill. Smart businesses use motivation to get results in their debt collecting. Motivation requires a delicate balance of communication, policy and incentives.

At the same time, if you want your customers to pay up consistently and on time, you have to have the ability and techniques to make them want to avoid the negative consequences if they do not pay debt on time.

This kind of training is known as the “Carrot and Stick Training”, and if you are a parent you would know all about it!  With kids, this is the approach that really works.

A good debt collector knows that this approach also works with customers.  So, how does this technique work in debt collecting?

First, the “Carrot”:

  • Offer your customers an incentive to pay on time, or to even pay up front (this works the best for continuous accounts as the saving for the customer adds up with time).
  • Offer your customer a percentage discount on their accounts if they pay the full account before the due date. Depending on the business you are conducting, anything between 2 – 5% is reasonable.
  • Offer your customers a fixed amount deduction if they pay the full account before their due date.
  • Offer your customers an even higher percentage discount if they pay their account at the time they are getting it issued.
  • Even better, offer your customers the best % discount if they are happy to pay you in advance for your product or services.  A 10% discount is a good start, but you can play with the discount by trial and error. Outdo your competition by offering a little bit higher discount and you move your business ahead of the competition! This really works for the clients and you are getting credit in advance that can boost your business further.
  • For credit card payments, offer waiving of the merchant fees involved if the full account is paid before the due date.  You will be amazed at how many customers are frequent flyer users and it would be a minimal discount for you, usually between 1 – 3%.

For the 2nd part of this article, read our next blog post… Coming soon…