28 Nov 10 Top Tips for Making Past-Due Account Management Pain-Free
Building relationships with new clients can be a lot of fun. It’s interesting to learn about the services they provide and it can be intriguing and intellectually stimulating to analyze their business and offer opportunities for growth and improvement.
It’s not quite as fun once the new bloom of the relationship has worn away and you have to chat with them about late payments and past-due accounts. No one wants to have those “you’re late” conversations, and it can be especially difficult for businesses in service-oriented fields like accounting.
Often, when it comes to making payments, clients feel like they have a little more leeway with service-oriented partners. They’ll sometimes give first payment priority to providers of physical goods, like inventory and utilities, giving gives a literal meaning to “keeping the lights on.”
How can you create a relationship with your clients that makes collecting past-due invoices pain-free? It comes down to communicating early and often, implementing problem-solving solutions and making it easy for them to do the right thing when it comes to paying for your services.
The best time to set payment expectations with a client is at the beginning of the relationship. At that point, everything is theoretical, and no one’s feelings will be hurt when credit terms are presented.
When you onboard new clients, get them set up with payment options, including using an online payment portal, putting a company card on file or setting up fee financing (a flexible payment schedule) for their invoices.
Realize no one wants to be past due
As painful as it may be to talk with a client about a late invoice, you can assume they feel equally mortified over the conversation. No one wants to be confronted about late payments or to feel like a slacker or failure in their business operations.
Instead of treating a past-due conversation as a confrontation, take the opportunity to see it as working together toward a common goal. When you approach your client as a helpful partner instead of as a taskmaster or antagonist, you have a better chance of getting a positive response.
Empathize with their busy schedules
Small business owners are wearing a lot of different hats. Many of them serve as the face of their business, as well as managing operations, logistics, finances and marketing.
Instead of adding one more piece of mail to the mountain of papers they review at the end of the day, make it easy on them. Providing an online portal with 24/7 payment access means they can submit their payments to you whenever they happen to be reviewing their finances, instead of crossing your fingers and hoping they bring by or call in a payment during business hours.
Allow them to save face
It can be embarrassing for a client when they are forced to make a late payment or to ask for more time to pay. And, it can also be awkward for clients to tell you they want your services but just can’t afford them right away.
Oftentimes, it can just be easier to try to avoid the conversation altogether and hope that the money rolls in.
Giving your clients access to fee financing can allow them to save face from the start. Fee financing is a method of payment that allows the client the opportunity to pay over time, while making sure your firm receives its money up front.
Providing fee financing allows clients to confidently discuss work with you, knowing they’ll have a means available to pay for the work over time. And, it allows you to build a stronger, multifaceted relationship with them because you have the opportunity to present multiple options for potential services that can truly benefit their business, without worrying that they’ll be overwhelmed by the upfront price tag.
Use technology to your advantage
Everyone’s connected to devices and computers and even mobile phones these days. In fact, some business owners may not spend much of their work time at a traditional desk at all.
When you meet them where they are when it comes to technology, you have a better chance of a pain-free overall experience. Automated invoicing and reminder systems can reduce the burden of past-due relationship management, while allowing clients to pay you using electronic means can reduce the payment hassle on both the client and firm’s sides.
Making clients aware of convenient and innovative technology you offer can be enticing when they’re determining whether to work with you as well. Most businesses know the importance of keeping ahead of the curve when it comes to providing solutions for clients, and they want to work with vendors and partners who have a similar vision.
Be a problem solver, not a problem creator
We all love interacting with people and products that make life easier. The same goes for businesses; clients flock to businesses that eliminate problems and provide solutions.
Instead of creating problems for your client with a messy invoicing and payment process, you can provide convenient solutions by offering payment options that fit their needs.
Whether that’s the ability to quickly and easily make an ACH payment online or the opportunity to pay over time with fee financing, when you make payments easier, you’re more likely to have a good experience getting them on time or collecting them if they fall past due.
Communicate clearly and consistently
Again, good communication goes back to the idea of starting early and setting clear expectations with clients.
When they sign on with you, make sure you give them a comprehensive overview of what to expect when it comes to payment timelines. Spelling out your firm’s payment terms and options in your engagement letter gives you a way to provide details clearly and unemotionally, and gives you a point of reference in the event that you need to talk terms with recalcitrant clients in the future.
On your firm’s side, take a look at your processes and make sure are sensible, well-structured and consistent.
If you tell clients you always send invoices on the last day of the month, ensure your staff knows it’s a priority on those days. Technology can help in this area, including automated invoicing systems that take out some of the room for human error or typical busy schedule slip-ups.
And, on the payment side, make sure you’re communicating the best ways to pay and making it easy for your clients to do so. If you offer an online payment portal or provide multiple payment options, give your clients that information and repeat it often, until it becomes second nature for them to pay in that way.
Avoid taking it to collections
Once you have to take a client to collections, you’ve wasted a lot of your time and money, and you’ve probably burned the bridge on the relationship. Screen your potential clients well to make sure they have the wherewithal and the desire to pay you.
If you have a good client who is just in a bad situation, look for ways to be proactive and become a solution provider. If you can you give them the opportunity to pay the invoice over time, again, fee financing can be a great tool and a relationship saver when it comes to upstanding clients who need your services but may be struggling to pay for them.
How do their past due accounts affect you?
While you may really want to give clients some leeway and flexibility on their payments, you also have a responsibility to your business.
According to the Inside Public Accounting 2018 National Benchmark Report, close to 30 percent of CPA firms’ accounts receivable are past the 90 day mark. As the person in charge of your firm’s livelihood, you need to analyze your accounts and have an understanding of how late payments can hinder your business from being truly successful.
When you offer clients fee financing as an option, you’re providing a win-win situation that positively impacts cash flow for both businesses.
You receive the full invoice payment upfront, which gives you a little more breathing room in your budget. And, in the meantime, your client has the opportunity to make payments over time, instead of forking over one big lump sum.
Create a culture focused on proper payments
As the leader of your firm, you may have a strategic plan for making sure payments are received on time. However, if your staff isn’t behind your vision, you may find it difficult to properly execute it when a late payment situation occurs.
As an example, if a client services team member wants to maintain a good relationship with the client, they may be tempted to downplay the urgency of timely payments in order to keep the client feeling pleased with them (and by extension, with the firm). While this may work in the short term, it doesn’t benefit anyone in the long run if you or another team leader has to be more aggressive later to counteract the first impression they received.
Make sure your entire team, from client services to support staff to your senior leadership, understands the importance of proper, timely payments and how it affects the business’s ability to expand, innovate and, in some cases, even pay salaries and bonuses.
Get your team onboard with advocating for payment systems you put in place, including online payment portals, fee financing or ACH payments.
Once they recognize and buy into the value of timely payments, they’ll be able to influence clients positively, instead of being apologetic regarding your processes. They may even be excited to share the convenient technology you offer, as a way to show how advanced and client-friendly your firm is.