Collection calls for past due invoices are never easy. During the financial crisis brought on by the COVID-19 pandemic, these calls are even more difficult. You’ve spent a lot of time and effort building and maintaining this valuable business relationship, and it’s important to try to preserve it. But cash flow is still a critical factor in keeping your business afloat, especially now. Here are a few tips for working with delinquent accounts, while trying to preserve business relationships.

Start with empathy

Businesses go through difficult periods and hardships all the time, presenting sticky problems for Accounts Receivable (A/R) departments trying to collect on delinquent invoices. Typically, delinquent invoices are handled with understanding but firmness; however, with the pandemic, nothing is typical.

The pandemic has shifted the way businesses operate, disrupted supply chains, and caused significant financial damage to the economy and business cash flow. This can lead to delayed payments as businesses struggle to stay above water, financially. The best way to approach the situation is to start with empathy. Taking the time to understand the challenges your debtor may be experiencing during this pandemic will not only help you foster a strong relationship, it will provide critical insight into their business so you can establish effective next steps of debt recovery.

Cash flow is still crucial for a business’s survival, but so are business relationships. Businesses need suppliers and suppliers require payments to keep supplying. It’s a difficult balancing act; and unfortunately, COVID-19 has caused a large increase in unpaid invoices. Starting the conversation with empathy will go a long way to establishing a debt recovery plan.

Send written communication

Written communication to your customers regarding overdue invoices is an important step toward debt collection. Customers may respond better to a letter or email. Create a letter or email template for requesting payment, but be sure to personalize it for each business that is delinquent. Also, be sure to include specific details about the delinquent account, including:

  • Date the invoice was sent
  • Date the invoice was due
  • Invoice amount
  • Terms of the repayment

Be courteous and non-demanding. Find common ground.  Empathize with their situation and tell them a bit about yours — just the basics. It can be comforting for your customer to know that your company is experiencing struggles as well. This creates a sense of community and will help to keep the lines of communication open.

Pick up the phone

If letters and email fail to get the desired response, it’s time to call the customer. Ask to talk directly to the person responsible for paying invoices and allow the person to explain what’s going on. Try to be flexible and be willing to negotiate new payment terms to increase the likelihood of full repayment. Remember, you can be understanding while still being firm. Try to end on a positive note.

If the customer still does not honor the new terms, turn the debt over to a third-party debt collection agency, like Mountain States Commercial Credit Management. Doing so will not only ease the pressure on your internal resources, it also will increase your chances of recovering payment while maintaining your relationships with that customer.

Need help managing your commercial credit risk? MSCCM financial experts can assist you. Contact us today.