Don’t Fear the Customer

Posted on April 4, 2011 by Michelle Dunn

“Some business owners have had their business for months or even years and when I give talks about credit policies, credit limits, and credit applications, they say, “I never did any of that and I have so many customers that owe me money and are past due.”  Many think it is too late to do anything about it, or they are afraid to ask a customer for the money or ask them to fill out a credit application.  They think they will make the customer mad and lose the business.  If the customer is past due or not paying you, why do you worry about alienating them?  This is a customer you do not need.  If someone is not paying you, they are not helping you.  Wouldn’t you rather have a customer that pays you? Stop working for free.

If you have customers that owe you money right now, today, you can and should do something about it.  Add up how much money is past due or is not being paid, the dollar amount will shock you.  Now is the time to take action!”

COMMENTS

Fear of losing the customer is one of the major stumbling blocks with businesses when it comes to bad debt recovery.  I completely agree on this! Michelle Dunn has made many valid and crucial points on this in her article above.

From my experience, this is especially true for small businesses that juggle all aspects of conducting business with fewer people and resources. For the reason of not having a proper credit control system in place lots of businesses at some point loose the consistency required to chase unpaid accounts (I refer again to Michelle’s key points of Credit Policies, Credit Limits and Credit Application).   For fear of losing the customer, proper chasing of debt is just not done regularly or the business owners just hope that a debtor will pay soon. On top of this, a common scenario is that a debtor comes up with different excuses, when you do end up chasing the debt.

One of the major things to remember and have in mind is that TIME IS THE KEY COMPONENT IN DEBT RECOVERY! Therefore, referring back to the famous saying   TIME IS MONEY.

Businesses get into trouble when they continue to hope that if they allow more time, their bad debt situation will improve and the debtor will ultimately pay.

With bad debt recovery, time is a key component. In other words, a creditor’s chances of successful debt recovery never improve with time. In fact, here are the statistics for debt recovery as time passes:

  • 60 days past due – 85% chance of collecting if chased than
  • 90 days past due – 73% chance of collecting if chased than
  • 180 days past due – 57% chance of collecting if chased than
  • 270 days past due – 42% chance of collecting if chased than

So, what can you do if this scenario plays in your business?

  • Do not waste time waiting on customers to remember their obligations, with time passing chances of them paying decrease sharply.
  • Do not procrastinate, act instead – contact your debtors and request a prompt payment.
  • Get rid of the fear to contact your customer and chase what is legally yours to collect!
  • When chasing debt, make sure you use the Fair Collection Practices Act Guidelines on Debt Collecting.