I don’t care if the economy is rip-snorting strong (which clearly it ain’t)… collections are always an issue. Here are 23 tips contributed by members of the TPE community on how to get your collections up to snuff, and get the money you deserve in your pocket now:
1. Get Clients To Ante Up …
How To Improve Collections: I’ve always gotten payment in advance — no pay, no play for my coaching. If you’re afraid to ask for money up front, maybe you’re not sure of the value of your offering.
How To Improve Collections: Improving collections begins by staying on top of your billing from the get go. If clients or customers know that you keep a watchful eye on your receivables they will take care of your account first. Regular and consistent contact is the key and most importantly pick up that phone. It is easy to ignore a letter or email but not a phone call.
How To Improve Collections: A great way to get more people to pay is to give them leverage. Here’s what I mean by that. More often than not, a Collections Representative or collections letter comes across sounding nasty or intimidating (ahem, so I heard). Imagine what would happen if the tone was lighter or even infused with a little humor. No doubt you would see more revenue collected.
How To Improve Collections: Most sales and marketing firms hound potential customers relentlessly for a good two weeks or a month, then they back off and you hear from them once a month. However, when you do need that a certain vendor, that company is the first to pop into your head! This method works! The same applies to collections, it is a pain in the neck, just like cold-calling, however, if you remain relentless for the first two weeks, and then back off to once every week, you will get your money within 30 days.
How To Improve Collections: Sure, it feels bad to have people shine you on and not pay. For your own peace of mind, it’s important not to get into a us versus them mentality. It only adds more stress for everyone. You can assume if they are not paying, they wish they could. So first, get in the right frame of mind and make personal contact. Do this as soon as possible and try and work out a payment schedule. If all else fails, use a collection agency. Knowing their credit rating will be effected is a great motivator!
How To Improve Collections: We require all of our clients to keep a credit card on file with us and sign an authorization allowing us to charge it for all sessions if they don’t pay at the time of service. Our billing service gave us the idea and we have zero bad debt! It’s been the best move we’ve ever made!
How To Improve Collections: When you have to collect funds, it’s not an easy task. Be peaceful and persistent.
In these situations, people are usually used to anger or impatience. You can be different.
Schedule consistent messages that are kind, concise and clear. Follow up persistently, so that they know you are not going away. Be positive. Everyone wants to help someone who is nice.
Be peaceful, be persistent, and you will attain the other important “p” word — profit.
How To Improve Collections: “I’m sorry, we cannot find your payment … would you please submit a cancelled check verification or credit card payment statement so we can update our files?” Customers who cannot find proof of payment are often apologetic and willing to pay asap, when you are kind and not accusatory. Be nice. Get paid.
How To Improve Collections: I have found great success in emailing invoices to customers along with sending them a copy in the mail. Our customers often have to pass the invoice along to a treasurer, so if it comes in email, they can just forward it quickly.
We also have an easier time collecting on payments that we demand prior to delivery. Its when we give terms that we get into trouble.
How To Improve Collections: Since I sell a product: wedding invitations: it is easy for me to keep collections high- people place orders with me expecting to recieve their invitations- and after they pay for them, they are welcome to pick them up! People who place orders online are not authorized for production until I have spoken with them or they have faxed me their credit card number. No pay, no play…
How To Improve Collections: My relationship with my clients is on going, therefore, my approach is friendly and assertive. We make the assumption that they want to bring their account current. We ask our clients, what do we need to do to make it easier for them to bring their account current. My clients are very responsive to this approach and will make a commitment for a specific time frame to make the payment and 9 times out of 10 they do. They like the humanistic approach instead of being treated like a number
How To Improve Collections: To decrease receivables and increase collections, businesses must proactively protect their own interests. First, use a contract with clear payment terms and penalties. Second, enforce your payment terms. You can still negotiate payment terms after the fact, but be the squeaky wheel and make sure you’re getting paid first. Finally, where possible, obtain payment upfront, automatic credit card payments, or personal guarantees from the business owners. These steps help you collect more, sooner.
How To Improve Collections: When I started my first business we had to do whatever it took to collect the money. If a client couldn’t pay in full I used to ask them to meet me half way. If someone owes you $100 and they meet you half way only $50 will be due. A little bit is better then no bit at all.
How To Improve Collections: While asking for monies due you from customers who have already received goods or service is not so hard, it can be very sensitive. I always believe customers want to pay their billing. Before I pick up the phone to dial, I visualize a good, responsive conversation with monies on the way. Your smiles and confidence will be felt as good rapport and the customer will end up at least wanting to resolve the issue. IT WORKS!
How To Improve Collections: Since nomie baby is a new, running-a-shoestring company, I have to watch every penny, and can’t afford to spend time chasing down payments. Therefore, I have always asked for credit card information, and verified it BEFORE I ship the products. The one time I didn’t do that, I got stuck, and 2.5 months later I am still it chasing down. Upfront is the safest!
How To Improve Collections: Ask for payment in advance. Maybe offer a discount to encourage people. If they argue, ask them if they’ll give you their product and you’ll pay them when you get around to it. They’ll either tell you, “Nonsense! We’re running a business here!” in which case, you remind them that you are too; or, they’ll agree (unlikely), in which case you can tell them that’s why they need to get you in quickly and you’ll start as soon as payment arrives.
How To Improve Collections: 1. Get paid at the time of service
2. Invoice customers on a regular basis and as soon as the work is complete
3. Make sure your invoices have the due date clearly visible
4. Change your payment terms, if your terms are net 60 or net 45 change them to net 30 or net 15
5. Offer an early payment discount to anyone who pays early, such as 1 or 2% off the bill if they pay within 10 days
6. Act early – when an account reaches 30 days, take action
How To Improve Collections: The world is our mirror and whatever we do we gets reflected back to us. For me this philosophy has worked like magic: whenever a client is late, I look at where it is that I may be late. What do I owe to others? It does not have to be money. Maybe it is a promise unfulfilled, a call I didn’t make. When I get my house in order and pay my own debts, invariably those who owe me, pay.
How To Improve Collections: Want to talk to a creditor, when he is seeking his dues angrily? Maybe rightful dues,nevertheless you still are a shark – at least to somebody who owes you money.
It has been my experience that people respond better when you offer something. Always. So if you are collecting, try softening your stance by making an offer to ‘waive a fee’ or ‘a reduction in debt’ for prompt payment – ‘free lunch coupon’ – anything that makes you look less threatening or patronizing to your debtor.
How To Improve Collections: When the person is billed for services, introduce them to the collections agency person via e-mail or phone call. Perhaps if people knew for sure that their bill would be sent to collections up front, they would be more likely to pay the bill.
How To Improve Collections: I found success when my business joined Pre-Paid Legal Services. As a business member, I automatically get a membership to GoSmallBiz.com, which has pre-written collection letters. I can opt out of using those letters and go directly to my attorney to have him send out demand letters. The demand letters are my last resort for payment but are very effective.
How To Improve Collections: In this economy, business is at an all time low. Paying your bills is a hardship. Most often, businesses will prioritize their bills into what needs to be paid first and what can be put off. To put your company at the top of the priority list, reward them by giving a 10-15% discount if they pay a certain time before the collection is due.
4 Responses to “23 Ways How To Improve Collections”
Meri Harli AKA The SEO Queen Says:
August 27th, 2009
Hi Mike,
Thanks for posting these tips! They really inspired me on my ‘bill paying’ day. Love your work. Have ordered your book.
Warm regards,
Meri
PS.. love those videos, so very inspiring!!
Mike Michalowicz Says:
August 28th, 2009
@Meri – Thanks for checking out the site, and so happy that you like the videos. And a big THANK YOU for ordering the book. I promise you, you’ll love it… and tell me if you don’t, I’ll send you a bottle of wine or something :>)
- Mike
MIke Says:
September 1st, 2009
How can I get more people to buy my product.
Thank you,
Mike
Mike Michalowicz Says:
September 2nd, 2009
@Mike – Wow that is a big question. And could only be answered by asking you a 100 questions about your product. But the starting point, I suggest is to watch the Videos on the TPE site. A lot of people ask questions about sales, and perhaps you can find some ideas that will help you.
August 27th, 2009
Hi Mike,
Thanks for posting these tips! They really inspired me on my ‘bill paying’ day. Love your work. Have ordered your book.
Warm regards,
Meri
PS.. love those videos, so very inspiring!!
August 28th, 2009
@Meri – Thanks for checking out the site, and so happy that you like the videos. And a big THANK YOU for ordering the book. I promise you, you’ll love it… and tell me if you don’t, I’ll send you a bottle of wine or something :>)
- Mike
September 1st, 2009
How can I get more people to buy my product.
Thank you,
Mike
September 2nd, 2009
@Mike – Wow that is a big question. And could only be answered by asking you a 100 questions about your product. But the starting point, I suggest is to watch the Videos on the TPE site. A lot of people ask questions about sales, and perhaps you can find some ideas that will help you.
- Mike