Unpaid invoices are part of our business. Of course, we want to receive the money owed to us, but the hard part is the task of receiving payment while maintaining the valuable relationships it took time to establish. For many businesses, collections are often marked by confrontation and ruined relationships, but this need not be the case.
Modern, professional collections involve no confrontation, only communication, a strategy, and respect. The philosophy behind modern collection is quite simple: a client who is late paying you today still may be your best client next week. In this guide, we will outline a possible framework for a collections process that will help you get paid while protecting and possibly strengthening the business relationships that are the lifeblood of your business. This ethical approach is not just good business practice, but also a strategic decision to protect your brand, develop client loyalty, and ensure the long-term financial stability of your company.
Proactive Systems and Clear Communication
The best method for dealing with a collection issue is avoiding collections altogether. This is established well in advance of an invoice being overdue. It entails excellent internal processes that prioritize clarity and common understanding from the outset of a business relationship. Implementing proper debt collection best practices begins with your documentation. For example, the contracts, service agreements, statements of work, and other relevant documents should all have payment terms, due dates, and steps around unpaid and delayed payments clearly defined, without ambiguity whatsoever.
When a job becomes overdue, communication is important, but it also must be timely and professional. In many cases, simply sending a friendly message via email could resolve an account issue without any confrontation. The main focus, at this point, is to inquire (not demand) and to understand their situation; the issue could be a simple lost invoice or an internal administrative delay. Establishing this communication as a non-confrontational exercise earlier makes this debt collection relationship management strategy a great foundation for defining effectiveness around debt collection, and shows that you consider the client as a partner rather than a delinquent account.
The Process
When the reasonable reminders don’t produce results, a more definitive strategy that incorporates a professional approach while remaining ethical is required. This strategy is built on a handful of principles:
- Start with Empathy and Solutions: The goal is to maintain relationships during debt recovery. This process begins with training your staff to be active listeners- this encourages the staff to understand the “why” behind the delay, which is a cash flow issue or a service disagreement. This may help in negotiating working together to build a possible agreement, like structuring payment plans rather than escalating into conflict as the only solution.
- Maintain Persistence with Professionalism: This is the basis of respectful business debt collection. In every email and every phone call, the tone must always remain professional, this is where it is important not to get emotional or accusatory. This balance of being firm on the need for payment and flexible on how is what defines professional B2B debt recovery.
- Uniting within a framework of ethics: Each step in the decision-making process will reflect a commitment to performing commercial collections with integrity. This also protects your business and reputation. The best practice is to comply with the principles set by regulations like the FDCPA, which includes no harassment, no misrepresentation, and no putting pressure through unfair means.
- Emphasize Documentation and Compliance: Documenting every communication is not only for your internal records, it is necessary for compliance in commercial collections. Documenting communication can be extremely useful in helping to sustain accuracy, maintain client confidential information, and help create a clear audit of the collection activity being performed.
By implementing this combined strategy, all collections will reflect your company’s commitment to ethical commercial collections.
Conclusion
Thinking about debt collection as a necessary evil is an antiquated thinking pattern. You can take debt collection, the piece of business that people often think of as a possible liability, and make it a more involved, strategic, and inseparable part of your business by having thoughtfulness and professionalism along with a higher ethical level within your organization.
This way, you not only increase your opportunity for recovering the money owed to you, but you also demonstrate to your community and your industry that your business has integrity and values your client relationships. Ultimately, a client who has been treated fairly, at a time of financial distress, is more likely to return sooner as a loyal, longstanding client. This demonstrates that debt recovery and client retention are not contrary goals, but two sides of the same requirement to be successful.
Join NACM Southwest today to speak with our collection specialists for a confidential consultation.
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