Being a small business owner, probably you might have learned the definition of “delinquent” – the first time a customer has failed to pay for something on time. Cash flow is necessary for every business and more so for small businesses, especially during your early days. Delinquent customers can negatively impact and profoundly affect the cash flow.
8 Delinquency Collection Tips Every Lending Business Can Benefit From
Hunting the delinquent customers, discussing the problem, and getting the funds can be tedious and lengthy. To ensure that you get paid, use the following debt collection tips and techniques for the best results.
1. Take a Positive Stance
For a variety of reasons, customers might not be able to pay their bills on time. Typically, a delinquent customer falls under one of the following categories:
- They might be going through certain financial difficulties, especially in today’s times.
- They might intentionally delay the payments to manage their money.
- They are avoiding payment altogether.
If a customer is delaying their payments, it’s essential to look into why it happens. Apart from the listed ones, they might have even forgotten about their due dates. In such cases, provide a gentle reminder via phone, email, etc.
2. Use Multiple Channels
In today’s electronic era, handling invoicing and debt collection over email are quick and straightforward solutions, but it is not foolproof. Email reminders get easily buried in an overstuffed inbox.
In such cases, use additional means of reaching out to your customers who have missed the payment. Offer online payment options by providing a payment link or QR code on your invoice template.
3. Follow-up Promptly and Persistently
How will your customers remember their payment if you don’t remind them about it? It may be the case that you might think they could remember when they have a payment due. But remember, these accounts are delinquent for a reason.
Remind them! Prompt and repeated reminders often work wonders. The customers will also be more vigilant and careful. This will even keep you on top of their payment priority lists.
4. Have a Delinquent Account Policy in Place
Even if you are good at screening new customers for their creditworthiness and monitoring the financial health of existing customers, you might still end up with a few delinquent ones.
So, it’s important to have a good credit and collection policy that lets your customers know what to expect when they don’t pay on time. Write how your business handles collections, and let new customers read and sign the policy before issuing any new credit.
5. Give Them Options
If you are trying to get those delinquent accounts in as soon as possible, think about what will help. If the customer finds difficulty paying now, it might be possible for them to make payments over time.
Try to work out a plan that will suit both parties. If the party can’t pay in full at the moment, give them the option of easy EMIs. In this way, you will receive the payment you are owed in a manner that will ease whatever financial burden is delaying the payment for your customer.
6. Encourage Credit Card Payments
If you don’t allow credit card payments already, it might be worth giving it a thought now, at least with a customer for whom payment seems to be challenging.
Even though a credit card payment comes with a small fee, it is worth more than the time you would spend chasing each payment from them. You can also encourage your customers to automate their monthly payments. It works like subscriptions, and you can automatically bill their cards each month for the payment.
7. Be Friendly, But Tough
Even the tone of your voice can affect the result of the conversation. If you are positive and cheery, the person on the other side may respond better. It’s quite natural to feel sorry for the customers who have good excuses for not paying.
There’s no way to know whether their reasons for the delayed payment are true or not. When customers make such excuses, give them some sort of compromises, payment plan, or other arrangements to show your willingness to stand with them, but at the same time, you also want to avoid letting that person take advantage of you.
8. Seek Legal Advice and Issue a Complaint
Lastly, if nothing else is left to be done, seek legal advice and issue a formal complaint against your delinquent customer to the proper courts. Depending on the amount you are owed, it may be vital to take your customer to a small claims court.
Keep in mind that any such legal actions may involve you paying specific fees, and lawyers can be expensive too. But just the fear of getting sued might bring the customer to pay their dues as soon as possible.
Finezza’s Digital Solution for Your Business
Dealing with delinquent customers is a big hassle, especially for small lending business owners. However, you can make the process easier on your entire team with the help of Finezza.
Finezza offers a unique debt collection app which is a form of delinquency management solution, wherein it makes the debt collection hassle-free. This streamlines the monitoring and managing of loans, delinquency management, and debt collection by making crucial debt collection information accessible 24*7.
Some of the main features of this collection of delinquency management software are:
- Automatically generates calling and follow-up lists for the operations team.
- Transaction addition and approval management.
- Real-time update of all data and communication.
- Custom Payment link generator for added security.
- Safeguards lenders with enhanced fraud management solutions against potential risks.
Among other features, it offers PTP and location tracking with the collection updates available on the web and mobile. It also leverages the power of artificial intelligence, wherein it automates the workflow, thereby safeguarding your business from risks and fraudulent activities adhering to all the business and regulatory mandates. We hope this will empower your business to make better decisions and faster ones.
Contact us today and digitise your debt recovery business with Finezza.