Source: Forbes.com/ Dean Kaplan
It happens to every business. At some point, a formerly good client or customer will not be able to pay their bills. You need to negotiate payment.
Here are five strategies to help you do that.
1. Send them to collections. Although I’m a collection agent, I’m not suggesting that this be the first thing you do. However, I wanted to list this option first because I also want you to know that going to collections should not be the last resort. Working with a collection agent can actually be a good way to save an at-risk relationship with a client. When a client owes you money, you have to stop providing them with goods and services. This may lead them to seek out your competition and set up new accounts. The longer you cannot work with them, the stronger their relationship with your competitor grows. By involving a skilled collection agent, sooner rather than later, you can resolve the problem and retain the client.
2. Get agreement on the situation. It may sound obvious, but before you can negotiate a payment, you need to make sure both parties agree about the situation. Do both parties agree that the same amount of money is owed? Do both parties agree that the work was done satisfactorily? Do both parties agree that the money is late? Having an agreement about the situation will make any negotiations easier. If you do not have contracts and a paper trail, it is very important that you solve the situation with your client. Very few lawyers will accept a case that they cannot win in court. It will be very hard to win in court without written evidence of the amount owed for the service or product provided.
3. Practice active listening. Active listening is one of the best negotiating strategies you can use in almost any situation. In active listening, you truly concentrate on everything that is being said. This style of listening not only gets you more information, but it also makes the other party more comfortable so they tell you more. With active listening, it’s important that the speaker can tell that you are listening. Body language, such as maintaining eye contact and nodding your head, is important. If you practice active listening, it is much easier to discover the real reason the bill has not been paid. Knowing the reason will help you discover a solution. It should go without saying that you do not want to make threats or become emotional. Bringing emotion to a negotiation rarely goes well.
4. Give options. The solution that makes the most sense to you might not make the most sense to your client. Remember, the goal is to get as much of your money as possible, as soon as possible. Offer your client options in terms of timing and amounts paid.
5. Offer discounts. It may sting to think of giving a discount to someone who owes you money. However, you need to focus on the goal. Offering a discount for cash payment, or payment of the discounted balance by a certain date may help give the other party a feeling of a “win” that will spur them to act. Be careful about any discount you offer. Once you put an offer on the table, it’s difficult to rescind it. Make sure to keep careful documents of any agreements and confirm them in writing with your client.
Ideally, you will stop payment problems before they start. Credit applications and contracts are good ways of making sure new clients will be able to pay their bills. Good record-keeping and automated billing systems will help you see if there’s a problem with an existing client. Approach existing clients with any concerns as soon as possible to prevent the situation from becoming difficult.