Google ‘how to get paid faster’ and you’ll find list after list of tips and tricks to improve your collections process. While a disciplined process matters (you’re lost without it), seasoned receivables management specialist, Amanda Lee, also applies her studies in human behaviour, psychology, body language and Neuro Linguistic Programming to successfully collect overdue accounts for her clients. She leads with one core belief: people matter. “‘We focus on people, and money is the result,” says Amanda.
Amanda founded Amanda Lee & Co to help businesses turn difficult payers into highly profitable clients who pay on time. But she doesn’t just work with debtors. Much of her time is spent working with business owners who have allowed late payments to persist. “If a business owner inherently believes they are somehow ‘bad’ for asking for payment, I guarantee their ledger will be very overdue.”
It’s the micro and small business owners who are most affected, says Amanda. “They are convinced they have a friendship with their customers, and their customers will eventually pay.”
Amanda concentrates on changing the relationship business owners have with their debtors—moving from being submissive to creating a respectful relationship that values each party as partners in their respective businesses. “The main thing I change is how a business communicates with its debtors,” says Amanda.
“We re-educate debtors about how their supplier expects to be paid.”
Business owners should be distant from collections
Amanda advises business owners to concentrate their efforts on where they are most helpful in the business—that’s usually at the helm or bringing in the sales. Then they need to stay distant from the collections process. “They might hire someone to follow-up overdue accounts, but inadvertently thwart the process because they’re telling long-term customers it’s okay if they haven’t paid on time.” Amanda warns that’s when the collections process breaks down, because debtors learn they don’t need to take payment reminders seriously.
Communicate for a win-win for everyone
While it’s the easy option to let a family member take care of reminders and collection calls, if they don’t have the right skills, they won’t be effective, says Amanda. “The right person to collect money has excellent communication and negotiation skills and is intent on creating a win-win solution for everyone.”
Even if you’re not hiring a collections person, it’s possible for your automated reminders to communicate effectively for you. The right message and tone in an email reminder can create the perfect platform for your debtor to respond with valuable (even personal) information about their payment intentions. Start communicating within a few days of a payment becoming overdue, and always with the intention of respecting your own cash flow while trying to understand your customer’s business also.
Try: ‘I haven’t seen your payment come through as expected. Please contact me to discuss the matter if further extension of credit is required. I look forward to hearing from you today.’
Build the respect for your business
If you expect debtors to respect your business enough to pay on time, business owners must lead by example. That starts before the first invoice with credit only being issued after customers have passed a necessary credit application process. “It communicates to debtors that you respect your cash flow and manage it responsibly,” says Amanda. Payment terms and conditions should be clearly stated on contracts and invoices, and reminders should always politely affirm that your offer of credit is contingent on the payment terms being respected. If that’s not possible at times, keep communicating with your debtors.
Personalise but avoid getting personal
Human-to-human relationships can feel like a dying art in the age of technology, “but it’s the only advantage a business has,” says Amanda. Amanda is a fan of a personal opening that gives the customer a good feeling as soon as they start reading your email. “Avoid an email to ‘Dear Accounts’…it doesn’t land well with the person reading it”, advises Amanda. Try the following as a simple yet effective opening:
I hope your day is going well.’
Also, your debtor can feel attacked or intimidated if your message focuses on their behaviour. Instead, focus on your experience, advises Amanda.
Instead of: ‘You’ve been avoiding payments for two months and we’re cutting your supply…’
‘I haven’t been successful in reaching you by phone this week. I look forward to speaking with you today so we can discuss payment of your overdue invoices and make arrangements if necessary. I want to understand any difficulties you may be having to ensure continued supply, as I’ve enjoyed working with you in the past. I look forward to hearing from you.’
The latter message indicates you have been trying to communicate, sets your expectation of what should happen next, offers understanding, and reminds your customer of the value of your relationship.
Admit your mistakes and ask your debtors for their help
If you’ve ended up with very aged receivables, it’s time to front up and admit to your debtors that your credit control needs to change, says Amanda. Authentically communicate with them and seek their help to make your business better. Acknowledge that your business hasn’t managed its credit control well, and express that you want to move forward in a way that’s going to be better for you and your customers. Invite your customers to give you feedback on why it’s been difficult to pay you and commit to considering and actioning your customers’ feedback. Then, ask your customers if you can get back to them with updates on the improvements you’ve made to your systems.
“When you authentically invite your customers to contribute to your business, they feel valued and connected to you. That’s how you build loyalty,” advises Amanda.
Combining a best practice collections process with excellent communications is key to building respect for your business and asserting your intention to be paid on time. What could your cash flow look like if your relationship with debtors improved?