The causes of customer delinquency
Customers that take a long time to pay their invoices can be incredibly frustrating to an organization. If you have employees that drag their feet with the invoicing process, you may find yourself waiting upwards of 60 days to receive a payment from the customers. When you are waiting for customers to pay their bills, it will hurt your cash flow because you will be unable to purchase other goods for your business and you may be unable to pay some of the bills to your lenders. So what causes customer delinquency and what can you do to avoid losing money? Here are some of the causes of customer delinquency and what you can do about it:
- No income. There are some customers that do not have the money to pay their bills. They usually have little or no income, making it impossible to pay all of their bills. When you are dealing with this type of customer, always ask for a partial payment at time of sale. This way you will be able to collect at least some of the money from this person. Usually these individuals have a difficult time getting credit cards because they max them out quickly. Be weary of offering credit to them and be very cautious about offering invoices that give them time to pay. Ask for the full payment if they have bad credit or they have demonstrated slow payment abilities in the past.
- Forgetfulness. A lot of customers may be forgetful about their bills. You may find yourself sending out 10 invoices before they finally send you money. Like the person that has a small income you need to ask for money up front. Try enrolling this person in an automatic payment plan so you can withdraw the money from their account monthly. This is a great way to get your money and to help the customers that may forget to pay their bills.
- Overextended. Some people spend more than they make. Since 80 million Americans are in debt, you most likely have a customer that has overextended themselves. Since credit was easy to acquire in the past, these are the people that got approved for a number of credit cards and personal loans and spent the money before realizing that they dint have an income to pay it back. The good thing about some of the overextended customers is that they do have every intent to repay their bills. Offer these individuals payment plans as they usually will be able to pay them. Just don't let the customer set the terms, you should only give them one option for a payment plan in order to help them pay their bills.
The problem with customer delinquencies is that it puts you in the position of being the "bad guy". A lot of businesses really do try to help their customers and they don't want to be the person that is saying "no" to them. You must be the bad guy and flat out refuse to sell more products to the customers if they still owe you money from their previous transactions.
Contact a collection company to help you with customer delinquencies. If you hate being the person that calls them on the phone and tries to force them to pay their bills, let a collection company handle it because this is what they are trained to do. Invoice factoring is another method you can use to collect the funds from your customers. The one thing to know about invoice factoring is that the customer must have a solid track record of making their payments or the company will not work with you.