All businesses have to deal with customers who just plain won’t pay. These customers have their own unique reasons for not paying, whether it’s dissatisfaction with your products or services or just trying to get something for nothing. Whatever the reasons behind this behavior, non-paying customers can quickly eat up your profits and land your business in hot water.
To avoid finding yourself in serious trouble or even on the verge of closing down because of losses, it’s important to engage in proactive loss management. This simply means following up on non-paying clients and working tirelessly to resolve debts. When done correctly and systematically, proactive loss management often wields great results and cuts down on lost profits significantly.
Why Didn’t You Pay?
When a customer doesn’t pay, your first instinct may be to get angry and to demand payment right away. Unfortunately, however, that’s not very productive, nor is it usually very successful.
Instead, you need to have a strategy in place to reach out to non-paying customers to inquire politely about their experience and their reasons for not playing. That way, if a wrong has been done on your part, you can make it right, while still collecting your money and maintaining your relationship with the client. This is also a golden opportunity to figure out what you’re doing wrong in general and how you can fix it. In any case, it’s a good way to learn more about why some customers don’t pay so that you can weed out customers like them in the future. Some of the most common reasons businesses have found for non-paying customers include:
l Confusing invoices
l Surprise at the total/final cost of products or services
l Confused by the way business name appears on credit card statement
l Accidental double-charges
l Dissatisfaction with products or services
l Sudden change in financial status
l Focusing on other debts
Dealing with Data
Once you have collected information on your non-paying clients and why they don’t pay, you need to have a streamlined and straightforward way to sort this information and use it to keep you from dealing with the same types of people in the future. For example, if an analysis of the data you collect reveals that customers above a certain debt level often don’t pay, you can avoid dealing with customers within that same debt range in the future.
Regardless of why clients don’t pay, the fact remains that your business still needs to collect its money. That’s why, in addition to amassing useful information, you need to have a system in place for continued and escalating contact with those clients who don’t pay up once any existing issues have been remedied. Whatever method you use should be friendly and professional, but it should also get more and more serious and proactive as time without payment increases.
At the end of the day, proactive debt management is about getting your business the money it’s owed, but when enacted properly, with the help of a professional loss management team, it can also be about improving customer relations, making smarter decisions in the future, and keeping your customers and your reputation intact.