We all like to think that when we issue an invoice, it will be immediately paid with no qualms, no questions, and no delays.
This might happen 99% of the time, but there is still 1% where you will experience a customer not paying.
This is where negotiation and robust credit control processes come into effect and support you in keeping your cash flow flowing.
Commercial debt recovery process
Negotiating payment with debtors is a critical step in debt collection. However, we understand that it can be daunting and overwhelming to do.
The ideal time to collect monies owed is to begin your credit control process before invoices become overdue. For example, sending reminder emails a week before the due date can be a great reminder to clients that the invoice is still outstanding.
From our experience, credit collections and processes to support these situations don’t have to be intimidating or scary; they just have to be kept simple and straightforward.
Having a good and detailed commercial debt recovery process in place helps to make account management easier, and understanding some of the reasons why clients can’t and won’t pay can be essential in knowing how to take your credit negotiations further.
So, how can you negotiate with debtors to make settling payments easier?
Collection negotiation
Debt settlement is where you may negotiate with a debtor to accept a lesser amount than what is outstanding if payment is made in full.
Therefore, debt settlement success relies on good negotiation skills and processes.
Understanding the financial situation, how much can realistically be paid back, the possibility of payment plans, and more.
Areas to build into debt collection services and negotiations include:
Keeping the lines of communication open
A good credit control process is all about effective communication. Make sure to keep the lines of communication open by sending regular reminders and statements outlining balances, due dates, and more. Don’t wait until the set due date has passed and contact the customer, in what will feel like to them “out of the blue.”
Regular reminders and updates also mean that there is less chance of the client “forgetting” you and your payment.
A basic process for communication and contact could follow:
- Sending the invoice
- Sending a reminder that the invoice is due within a week
- A reminder that invoice is now overdue
- Final payment notice letter.
Finding out the reason behind late payment
What is the reason behind the late payment? Have they simply forgotten? Are they experiencing cash flow problems, and if so, could you compromise on a payment plan? Can your cash flow support this?
Do you need to change your payment terms? Is the invoice difficult to understand or unclear?
The aim is to find solutions to your business processes to support your business when a customer doesn’t pay.
During these conversations, you need patience and persistence, which leads us to…
Preparing for frank conversations
Before calling customers to chase payment and start the process of negotiating debt settlements, it’s vital that you gather all relevant information. For example, you should know the full amount that is owed, payment history, if there is any reason listed for non-payment, if late payment is a recurrence and more.
The more information you have, the better you can determine the best negotiation approach.
The focus is on building a rapport, listening to their concerns/reasons, seeing it from their perspective, and then presenting your case, how late payment affects you and your business, and the consequences of late payment.
Providing a range of payment options
Can you offer payment plans? Is this realistic? How much can your business afford to discount the settlement figure when negotiating a settlement figure?
Can you offer card payments, bank transfers, direct deposits, and more?
Providing a range of payment options reduces the number of excuses a client can use and shows that you’re willing to be flexible and negotiate to secure the best outcome for both parties while also showing that you won’t just let the debt slide.
Checking your payment terms
How can you make your payment terms better? Are they too long, misleading, or disruptive to your cash flow?
You can also negotiate payment terms by offering incentives for early payment, extending payment timelines, and setting clear boundaries, i.e., what is acceptable.
Reviewing your payment terms regularly and running credit and background checks on new customers helps minimise the risk of late payment.
Finding the best approach for you
Not everyone is comfortable taking on the role of debt settlement negotiations, and you have a choice of doing direct negotiation, where you deal with the customer and have conversations yourself.
Or third-party negotiations, where a professional debt collection team, like Direct Route, takes over these conversations on your behalf.
To reduce frustration and the awkwardness that can often be felt when chasing clients for outstanding invoice amounts, professional collection teams like Direct Route use various debt collection services to ensure a smooth and successful debt collection process.
Debt negotiations
The team at Direct Route has a proven track record in successfully collecting overdue invoices for a range of business to business customers.
We understand that negotiations take time and energy, so we aim to minimise the risk of late payment to you, working to all compliance standards by tailoring our approach to meet your requirements.
To find the best solution to your debt collection negotiations, speak to a team member today at +44 7860 197476.