Many business owners are now becoming much more open to the idea of offering a discount or a settlement amount to get paid, as well as setting up payment arrangements that allow the customer to pay off a past due balance while remaining a customer. If you own a business and have a business customer that owes you money, there are some ways you can work with them to get paid instead of having another bad debt write off.
One way to work with a past due account is to really take a look at their account, look at their order and payment history, and decide if this is a customer that has fallen upon hard times or someone who may be trying to avoid making payment. Once you have determined which kind of customer you are working with you can decide on ways to make it easier for them to pay you. One way may be to offer a settlement amount. Settlements work well if you know the customer has some additional money to be able to put towards an account, if it is getting close to the end of the year and they really want to get the debt off their books, or if you can break the settlement payment up into 2 or 3 payments maximum.
To offer a settlement to a customer you will need to decide what that settlement amount will be; will you deduct 10%, 15% or more? What date do you have to receive this payment in your office by in order for this settlement offer to apply? What is the cutoff date for the settlement offer? You never want to offer a settlement without having a deadline, and then stick to it, do not extend it. Most settlements are made in full – always try to get the settlement payment in full by a specific date, if payment is not made by that date, the offer is off the table and the full balance is due. Another option depending on the customer and the balance due and how old the balance due may be, is to offer a settlement amount and break it up into 2 payments or 3 payments tops. Never offer any more than that. Settlements are meant to get something paid, the balance written off and the account cleared, do not let it drag on like a payment plan. I have examples of settlement letters and settlement confirmation letters in my books that I have used with great success.
Another option if a customer cannot make a settlement or you do not want to offer a settlement is to establish realistic payment arrangements on the balance due. You may want to set up a plan where you get paid twice a month rather than a monthly payment, because as you set up payment plans you have to remember that you want to get as much as you can as quickly as you can. When a customer has to cut a check to you twice a month it not only lowers their balance quicker it keeps you on their mind more often. If this is a customer you may want to continue doing business with, once you set up the payment plan on the balance due and send your confirmation letter, if they want to place additional orders you can set those up as COD so you get paid for any new orders, they can keep receiving inventory so that they can keep making money and be able to pay you. Another thing that has worked for me is to add $100 to the COD ticket so that they are paying for the order they receive and also paying you $100 additional towards the balance due.
Another option is to ask for a credit card or automatic check payments spanning the length of the payment plan, this way you can charge the card or issue a check payment on a specific date during the month. You will need written authorization for this and you can also find that form in my book of letters and forms.
As you decide what types of options to extend to your customers remember that the reason you offer settlements or payment plans is to improve your cash flow while helping your customers. You want to be able to give your customer options when they cannot pay in full, the more options you can offer the better your chances of getting that payment. When you are able to work with your customers to get a balance paid you will increase profits and revenues, retain customers, improve your efficiency, increase your bottom line, minimize your risk, have less bad debt and be able to efficiently handle and control your A/R. Any time you are trying to get paid, you must look at it as a customer service that you are doing and you need to create a win-win situation in order to be successful.