9 tips for maintaining customer relationships when collecting debt

9 tips for maintaining customer relationships when collecting debt.

Effective debt management is an integral part of running a successful business.

We understand that debt recovery can feel daunting. Fear of hurting customer relationships is one of the most common reasons why small business owners don’t pursue debts.

However, with the right care and experience, it is absolutely possible to recover debt while maintaining strong relationships with customers.

In this blog, we share our top tips for recovering debt without damaging customer relationships.

1. Set expectations.

It’s important to set expectations early on in the relationship so both parties know what they’re agreeing to.

If you have a payment policy, communicate this with customers up-front.

Make sure your customers know when payment is due before completing the sale – ask yourself:

Is the due date clearly stated on your invoice template?

Are there any other places you can make the due date prominent – perhaps in the email or message that goes out with the invoice?

Terms of trade are an important tool to ensure everything is clear, and watertight, from the outset.

It could be about getting paid on time, having jobs canceled at the last minute, defects being noted some 12 or 24 months after the work was completed, or being able to pass collection costs on to the customer for late payment.

Without Terms and Conditions of Trade being disclosed prior to work being completed, or services provided, you could be leaving your business at risk.

2. Invoice clients as quickly as possible.

Customers often consider when they will pay off a product or service at the time of purchase.

Invoice them straight away and you have not only increased your chances of getting paid, but you have also helped your customer feel good about the transaction.

If customers receive an invoice months later, they might not be in the same financial situation and the invoice can be unsettling (and may end up requiring debt collection).

Hot tip: When should you escalate a debt for collection?

If after 90 days the invoice has still not been paid, engage your debt collection agency without delay. Your chances of recovery diminish with every day that goes by so loading a debt now is your best course of action.

3. Have records ready.

If you are contacting a customer, have their invoice, name, and details ready to go.
Check your notes for any commitments they have made previously to you about debt repayment, and what their track record is like.
Making the process as easy as possible, and ensuring you are as informed as possible ahead of the contact with the customer, will go a long way.
Hot tip: When to make notes?
Whenever you speak to a customer about their debt, make sure that you also record any important notes that may help you better work with the customer in the future. Then, keep the notes in the same place for each customer, whether it is in a hand-written logbook or your online CRM system or accounting system. After all, you can only check your records if you made them in the first place!

4. Listen to your customer.

Customers will likely have stories about why their payment was late. Something as simple as listening can make a big difference to the customer’s experience.

Practice active listening, and let them say their piece. Even if you don’t necessarily believe everything they say, this will help them feel heard and respected.

Hot tip: Demonstrate active listening

One simple and effective technique is, to sum up, what they have said in your own words, and repeat that back to them. Checking in – asking “did I get that right?” – gives your customer an opportunity to clarify any details and feel confident that you’ve taken the time to understand them.

5. Empathy goes a long way.

Financial difficulty can feel embarrassing and stressful. Especially in times of economic difficulty, many previously successful large and small businesses may have never had an issue with debt collection before now.

Put in the effort to understand your customer’s situation. Empathy can help to build trust and loyalty and help them feel supported through the debt recovery process.

Hot tip: How can you show empathy?

Displaying empathy can be as simple as the language you use, and the tone of your voice. Try softening your facial expression and wearing a kind smile – it is amazing how this can come through in your voice over the phone. When you speak to your customer, let them know you hear them as a small business owner. Validating statements like “that sounds like a really difficult situation” and “I really feel you on that one”, if said in a genuine way, can help steer the conversation toward a positive outcome and help maintain your relationship.

6. Remain calm

Even if a debtor becomes irate or loud, it is essential that you remain professional and calm.
It is hard for a person to remain upset for long if the person on the other end is behaving reasonably and setting an even tone.
Once they have calmed down, space for the debt recovery conversation can open up.
Hot tip: How to keep your head in a tricky conversation?
The first thing you can do if you find a conversation escalating is to simply take a pause. Injecting a breath in the conversation helps the pace to slow down and become less reactive for everyone. Remember that if the person is angry or irrational, it isn’t personal. They are upset with the situation, not with you.
Another effective tool is to plan out how the conversation could go before you call. Write one sentence on how you can start it and 1 or 2 things you need to say to wrap it up. Accept that it may get messy in the middle and you are unable to control that, but that you will listen and do your best to adapt. A little mental preparation can help you be a skilled holder of difficult conversations every time.

7. Focus on solutions, not the problem.

Rather than focusing on the fact that the debt hasn’t been paid yet, focus on how the issue can be fixed. Flexibility is key – listen to your debtor’s situation and offer options that suit them.
Can the payments be spread across an agreed period of time to make the outstanding debt more manageable?
Is there a payment plan that will work in with them when they are paid?
What options exist within your Terms and Conditions of Trade? i.e. can you offer them extended terms, at an agreed interest rate or additional fee?
Are there bigger factors at play that need to be taken into account?

8. Agree on a commitment for repayment..

Now is the time to be firm but fair. Make sure you get a commitment out of them (a firm date and payment amount) as to when they will repay the debt. Then if they don’t meet that commitment you can escalate it to your Debt Collection Agency (that’s us!) without delay.

Following up your phone call with an email to them that puts the agreement in writing, is a good idea in order to ensure everyone is clear on the expectations.

Make sure you make a note of it in your accounting or CRM system as well, so the information is tidy and there when you need it.

9. Use a professional.

At EC Credit Control, we’ve got you covered. If you are finding it hard to chase down payment on a monthly basis, we can help.

You have more than enough to do than chase slow payers. We can take care of the worry for you.

Debt recovery is a skill and not everyone can do it well. You may find it uncomfortable to ask for money in case it affects the relationship you have with your customer. You might also just not have the time to set aside for ongoing debt management.

Our team are experts at having difficult conversations.

We understand the difficulties that can lead to outstanding debt so our approach is always firm but fair. Our specialists have worked with a range of personality types and reactions across all industries, while still maintaining strong relationships between our clients and their customers.

Adding an expert to your team is an easy way to ensure your customers are being handled with care while freeing up your own time to focus on growing your business.

Find out how we work, and learn more about our simple online debt collection process.

Want to know more?

If you would like to talk to us about how we can help you with your debt recovery we are more than happy to help.

Call your local Business Support Specialist, fill in your details below or contact Customer Service at 1300 361 070.

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EC Credit Control offers you total debt management. Operating since 1989 we have the experience, skills and expertise to deliver these services to your business promptly and efficiently.

We’ve put together some brief stories that highlight what and how we’ve been able to help our clients.

EC Credit Control is today a recognised leader in the Debt Collection and Credit Management industries.

1300 361 070

Effective debt management is an integral part of running a successful business.

1. Set expectations.

2. Invoice clients as quickly as possible.

3. Have records ready.

4. Listen to your customer.

5. Empathy goes a long way.

6. Remain calm

7. Focus on solutions, not the problem.

8. Agree on a commitment for repayment..

9. Use a professional.

Want to know more?

Contact us

Phone 1300 361 070

info@eccreditcontrol.com.au

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