The COVID-19 pandemic has made the environment difficult for countless businesses across the United States. As more business downscale their operations or close their doors permanently, collecting outstanding payments can be challenging for any business.
While you want to be paid on time to meet your own operational costs, invest in new opportunities, or adopt the online business model, you also don’t want to ruin the priceless business relationships that you’ve carefully cultivated.
Let’s look at some ways your company can effectively collect debt from other businesses during the pandemic:
#1 Don’t Waste time
Studies show that debt becomes harder to recover with time, so it’s essential to act fast when payment is overdue. If your debtor is going out of business, you don’t want their other creditors to drain their remaining resources.
#2 Don’t Lose Your Cool
While it’s easy to feel stressed during these uncertain times, you must not lose your cool. Always speak to your debtor in a friendly yet professional manner. You can express that you need the invoices to be cleared urgently without being aggressive. Remember, a negative attitude is likely to leave you at the bottom of the “to be paid” list.
#3 Follow Proper Invoicing Practices
Always make sure your contract is airtight with all details clearly outlined. Add incentives for early payments like discounts, bonuses, and late payment fees. Send your invoice on time and to the right department. In addition, ensure that the invoice is correct to avoid delays.
A good tactic is to develop a good working relationship with your customer’s accounting department so that your invoice is addressed on time. If invoicing is too labor-intensive, consider using modern accounting software that automatically sends invoices and polite reminders on time.
#4 Work with Your Debtor
Work with your debtor to ensure that you get paid. If they’re a loyal customer and facing a temporary financial setback, then give some leeway. For example, if they’re waiting for a bridge loan, then don’t burn any bridges over overdue invoices. You may offer a payment plan or waive the late payment fees for an extension.
On the other hand, trust your instincts. If your customer’s stock is falling or if their labor turnover is alarmingly high, or if they owe other businesses money, then take appropriate action.
One of your best options is to look for commercial debt collection agencies that can recover your revenue without damaging your reputation or hurting your business relationships. An excellent commercial agency doesn’t harass or threaten debtors. Instead, it resorts to skilled negotiation tactics, credit reporting, and its experience to recover your revenue.
#5 Extend Credit Carefully
While this may seem more like a preemptive, it’s critical to extend credit carefully to other businesses during the pandemic. Check their financial health with credit checks and references before you serve them.
If you want to take a chance on a new customer, ask for a deposit and set strict terms. If a business makes unfair demands upfront or is nitpicky, then take it as a warning sign. Ultimately, you must trust your instincts and be detailed-oriented. You can also outsource your entire A/R cycle to a professional collection team to avoid headaches.