Here Are Some Collection Tips for a Small Business
Small businesses are the essence of the United States economy. There are nearly 30 million small businesses in the country, employing close to 60% of the private workforce. In other words, American small businesses employ over 77 million people.
But despite outnumbering corporations by over 1162 to 1, paying nearly half of the country’s payroll, and generating most new jobs, small businesses are more vulnerable to adversity. Half of small businesses survive longer than five years, while one-third survive more than a decade.
It’s easy to be intimidated when you read some of the statistics. However, according to the U.S. Bureau of Labor – 75% of new businesses survive the first year, while 69% survive the first two years. One of the commonalities between the thriving small businesses is that they’re good at collecting revenue.
At Summit A*R, we’ve been in the debt collection business for over 23 years. As a collection agency for small businesses we’ve served many small enterprises from different industries, including dental, medical, veterinary, self-storage, landlords, and independent cellular providers. From our experience, we can say that successful small businesses do things differently:
#1 They Collect Money at the Point of Sale:
Instead of extending credit to customers, many small businesses collect payment at the point of sale when they can. This puts revenue faster in their pockets.
If they must extend credit, they run credit checks on new clients. They also check for references. These steps help them identify potential red flags and minimize their risk.
#2 They Keep Payment Terms in Writing:
Instead of agreeing to terms verbally, a good small business documents its collection policy and payment terms. This information is made available to the customer. All agreements are made on a detailed contract.
#3 They Communicate Clearly:
A successful small business communicates its payment expectations clearly to its customers to avoid misunderstandings. They make sure that a customer has understood and agreed to the payment policy, including the late fees. Late fees and early payment bonuses are used to incentivize timely payment.
#4 They Communicate Professionally:
Small businesses that successfully collect payments treat their customers humanely, even if payment is overdue. A professional, polite, and clear attitude helps collect revenue and create customer loyalty.
At Summit A*R we have a “P.H.D. Philosophy” (Preserve Human Dignity). We understand the importance of treating people with dignity, respect, and professionalism. One of the reasons our recovery rates are twice the national average is that we don’t use aggressive and shady tactics to collect payments.
Our philosophy also helps businesses preserve their reputation and maintain valuable relationships. The customer who owes you payment today could be your best client tomorrow.
#5 They Communicate Quickly
A successful small business has an organized debt collection strategy and invoices on time. They bill the customer as soon as the product or service is delivered. If the payment is late, they send another bill quickly. They follow this up with periodic reminders.
Such small businesses take advantage of modern technology. Accounting and invoicing tools can help you stay on top of your collection process.
#6 They’re Compassionate
Unlike a large corporation, a small business can easily cultivate personal relationships with its customers. This builds trust and loyalty. If a customer is facing a temporary financial hurdle, a small business may take the compassionate route and renegotiate payment terms. Instead of issuing threats, a small business can offer different solutions to improve customer satisfaction and build a relationship.
#7 They’re Realistic
A successful small business finds the right balance between being compassionate and realistic. If you’re a small business owner, then trust your gut. While some customers may have genuine financial issues, others may be intentionally delaying payments to manage their finances. Others still may want to avoid paying you, period. Don’t let shady customers take advantage of you.
#8 They Don’t Waste Time
When a small business is dealing with a customer who is intentionally delaying payments or simply doesn’t want to pay, they take immediate action. They realize that debt grows harder to recover with time.
#9 They Know When to Outsource
Most small businesses don’t have enough delinquent accounts to validate the expense of running an in-house collection department. Time and resources are valuable to a small business. Employees who are retrained to collect revenue are usually more effective in other departments of a small enterprise.
When a small business needs consumer debt collection they turn to us because of how quickly and effectively we can recover revenue. Usually, our campaign of demand letters and phone calls is enough to collect payments. Debtors clear their dues when a reputable collection agency like Summit A*R is involved. This is because we can report consumers to the three major credit bureaus. Most consumers value their credit scores.
We can also report businesses to credit bureaus. Remember, businesses have credit scores too. A bad credit report can affect their ability to secure loans and do business with others. The in-house collection department of a small business doesn’t have the ability to report customers to a credit bureau. Many debtors take advantage of this.
Just like your small business, at Summit A*R we believe in honesty and transparency. We don’t demand payments upfront nor do we have mandatory minimums. We can serve you whether you want to place one or two accounts in recovery with us.
Depending on the age, type, and balance size, our contingency fee is between 7.5% and 50%. Although we can recover most debts quickly, other accounts are more stubborn. We strive to get you paid in 90 days. After your money is recovered, it’s placed in a state-regulated trust account. Your net payment is sent to you on the 10th of the following money.
Remember, we also offer AR consulting. Over the years, our experienced and friendly accounts receivable management professionals have helped many small businesses enhance their recovery methods. With our expert advice, your small business can greatly improve its A/R turnover ratio.
At Summit A*R we work with businesses of all sizes. Whether you’re a sole proprietor, a small business, or a large corporation, you can count on us to recover your debt. Get in touch with us today for more details. You can email us, call us, or request a callback through our contact page.