Making collection calls to clients is the trickiest task you will have to navigate. For most, the only thing more uncomfortable than a collection call is going to the dentist.
Making these calls can be emotional for both you and your customer. Depending on how late the payment is and how much they owe, your emotions may be, “Hey! I’m holding up my end of the service agreement. Why aren’t you? Where’s my money?” This won’t achieve the outcome you desire, but these are very real feelings.
Your client will be apologetic, eager to help, embarrassed or aggravated by your call. In any scenario, think about what you want the outcome to be before you dial that phone.
Credit hold policy
Your goal should be to be as effective as possible at collecting cash. I would suggest writing a credit hold policy.
The first component of such a policy is to define the point at which you will stop delivering the service. For example, if your contract specifies payment terms of 30 days, then you will suspend service when an invoice is 60 days past due. In this model, you just provided your customer 90-plus days of credit. Regardless of whether you can afford to stretch your cash like that, you shouldn’t. If multiple customers start stretching your cash, you’re going to have a cash flow problem on your hands.
If you don’t want to damage the relationship, be sure to send multiple communications to your client to set the expectation. In 16 years of business, I’ve only had to suspend service one time. That suspension lasted one day because that client drove right to our office with check in hand.
We all know how hard it is to win new clients. The last thing we want to do as business owners is to terminate client relationships. If you want to avoid suspension or termination of your service, communicate with the customer early and often. Keep good notes; remind the customer of your communications.
To abruptly terminate your service without warning the customer is the wrong approach. Most customers will do everything in their power to get your bill paid prior to termination date, if you communicate early to them when that deadline is.
Smart business owners know which customers are not worth having. Inexperience and desperation cause some owners to take any and all customers, even ones that cause excessive grief to the company, or who you must fight to get paid.
One unwritten rule that seems to be spot-on accurate the more I use it is the 80/20 Rule — 20 percent of your customers will cause 80 percent of your grief. The more of the 20 percent customers you let into your business, the more your quality of life will go down.
If you take the time to write a credit hold policy, have the courage to stick to it. In the end, it will protect you and your business from the 20 percent.
Dennis W. Lejeck is the president and founder of Black Knight Security. Dennis is a graduate of the University of Pittsburgh’s Institute for Entrepreneurial Excellence and has also participated in the EY Entrepreneur Of The Year® program. BKS was recognized in 2015, 2016, 2017, 2018 and 2019 as one of the 50 Fastest Growing Companies in Pittsburgh.