Maintaining client relationships as you pursue an escalated B2B debt collection is a delicate balance. Many industries are “small worlds,” and your clients could be talking to each other more than you think. As a business owner, you need to preserve your bottom line, so commercial debt collection is critical. But, how you collect outstanding balances can affect the impression your other clients have of your company and professional business practices.
You can use these tips to help you maintain your professional business reputation, even when faced with an intense debt collection situation.
Before enlisting professional debt collection services, you may have tried to handle the problem of unpaid balances internally. Your sales team likely worked hard to secure the contract, only to have the client drag their feet about paying for goods or services. How your internal team approaches the topic of unpaid balances makes a big difference in how that client – and others – perceive you.
Effective, clear, and professional communication with the delinquent client helps you establish your expectations. Set professional boundaries and clearly outline the debt collection escalation process for your business – including taking legal action.
Approach initial debt collections from the mindset of a misunderstanding or miscommunication between you and your client. Keep a neutral tone and ask questions, trying to determine why the client isn’t paying their bills. Maybe there is a communication breakdown, and effectively establishing your expectations for payment can clear it up.
In the conversation, remain calm and respectful and avoid sounding confrontational. Although you may feel more comfortable sending an email, a phone call or face-to-face meeting may be better if you’re trying to preserve the client relationship. Sometimes, difficult conversations like debt collections are more effective when you can use sympathetic facial expressions and a calm tone of voice.
Clearly communicate the payment expectations and what will happen if there are future delinquent payments. Follow up the conversation by placing these expectations in writing. You could offer to negotiate a payment arrangement or settlement, focusing on working together with your client to find an appropriate solution. Any payment arrangement should also be confirmed in writing.
Professional commercial debt collection firms can help you preserve your business reputation by creating a degree of distance between you and the client. A good B2B collections specialist creates a specific plan to get your accounts current and, if possible, continue a business relationship with the delinquent client. Some services could include:
- Using credit reports and financial analysis to determine your client’s financial picture
- Developing alternative solutions and payment plans to match your client’s ability to pay
- Maintaining ethical standards in debt collection while firmly demanding repayment of the debt
- Preserving your business relationship during the process
You’ve worked hard to build your business, both your reputation and bottom line. Don’t let a contentious unpaid debt from a client negatively impact your reputation or financial success.
Why should I care about what my non-paying client is saying to other customers?
While your company may have done everything right in dealing with your non-paying customer, they can still discuss the experience they’ve had with your company with others within your industry. If your approach towards collection is overly aggressive or ignores disputes from your customer, the reality of the situation may not be reaching your other customers. Countering negative word of mouth often proves very difficult, and can damage your reputation across the industry, even if the story your customers are hearing doesn’t reflect the reality of the situation.
What are the negative impacts of damaging a customer relationship through collections?
Your business can face a variety of risks from damaging your business relationship with your customer while attempting to collect on an unpaid invoice. If your collection efforts damage the reputation significantly, you risk alienating your customer to the point where they simply refuse to engage with your company or collection agency at all. Any action which prevents open communication with your customer significantly reduces the likelihood of collecting the money you are owed.
Why should I be forced to accept a discounted settlement on money owed to me?
There are many reasons why settling for a discounted payment may be the best option for your business. The longer an invoice remains unpaid, the lower the odds of collecting the funds become; there’s a direct relationship between the age of unpaid AR and the likelihood of collecting. Furthermore, in cases where the business relationship has soured to the degree where litigation is the only option left to increase pressure on your non-paying customer, negotiating a discounted settlement is often the only alternative to going to court with your customer. Legal battles over unpaid bills are often lengthy and can grow quite costly; instead of spending hundreds or even thousands to pursue a judgment over the course of months or years, agreeing to settle gets you cash now and ends the legal battle. You may also be able to restore the business relationship by agreeing to settle and resuming your business relationship with a long-time customer. Finally, negotiating a settlement may be the only option for getting paid by a customer who is experiencing financial difficulty.
This post was contributed by our friends at Cohen & Cohen, a D.C.-based law firm specializing in personal injury whose lawyers understand the need to balance your bottom line with maintaining public image.