The Ideal Collection System: Getting your money while keeping your customers

Roy is the owner of a small company that sells and installs hot tubs. While he has tripled his sales in just a ten month period, he now doesn't have enough cash to keep the business growing. How can this be? The simple answer is that many of Roy's customers haven't paid their bills on time, and he lacks a system to handle delinquent accounts.

Like many small business owners, Roy saw collections as a part of the business process that would eventually take care of itself. "I hate pressing people for money," he explains. "I just thought, naively I guess, that if we did everything else right - if we generated leads, converted them to customers, and delivered the right product at the right price - then surely we'd get paid." Roy is learning, the hard way, that a sale isn't really a sale until you've collected the money.

Maintaining the balance

In a perfect world, no business would need a collections system, because everyone who owed money would pay their bills on time. For those of us living on this planet, however, a collection system must be a key component of our business operations.

Extending credit is a courtesy you offer to your customers, but extending it past the agreed-upon terms can severely strain your company, as it disrupts cash flow. Not only that, but it is a disservice to your clients and can also severely strain your relationship with them. As the business owner, you must create a collection system for your company that balances getting the money you're owed with maintaining the strong client connection.

Be a helpful partner

When customers don't pay on time - when their accounts go from "current" to "aged" - an ideal accounts-receivable system would cue your collection system to kick into action. You need a consistent, orchestrated system that notes overdue accounts and prioritizes the action as appropriate to each client's situation. This is important because every aged account has its own back-story. Some customers may have misunderstood your original credit terms. Some clients may reveal themselves to be chronically slow payers, severely overextended, or saddled with unexpected or seasonal difficulties. When clients pay late, don't take it personally or overreact. Instead, think of yourself as a helpful partner -- a problem solver.

Teach your employees that the company has an obligation to work with the clients to help them meet their financial obligations. Create a reliable collection system designed to "hear" the client story. Train your employees to approach clients with an attitude of care, and to offer a set of multiple, pre-defined options and resolution strategies in response. Insist they use benchmarked "discovery and response" scripts, as appropriate to the circumstance. Every contact must be documented to track its progress and effectiveness.

A true business advantage

As you and your team create your collection system, let diligence - the constant and earnest effort to do what you set out to do - and empathy - the understanding of your client's condition and the willingness to help them - be your guideposts. Give the customer a chance to explain, listen actively, and strive to help them.

You can avoid waking up one day and finding yourself in Roy's shoes as long as you don't allow collections to be the weak link in your growth plan. When you honestly care about your customers and can communicate directly with the accountable people, you stand an excellent chance of mending the relationship...and getting paid. If you can strike the right balance, you will turn this potentially fatal flaw into a true business advantage.

Check List:

• A sale isn't complete until the money is collected
• Past due accounts put the business and the client relationship at risk
• Develop an orchestrated system that responds to aging accounts
• Create a system that responds appropriately to each client's situation