Curing Slow Pay Customers
December 10, 2020
Debtor psychology is that if their debt is 180-360 days old, they figure they’ll never have to pay it, certainly not the full amount. Chronic slow-paying customers can be re-trained to be profitable, long-term relationships, but they require constant attention so that they do not age out to the point they become bad debts.
If you allow customers to pay late, your cash flow suffers.
Past-due customers may order from your competitors rather than risk your asking them to pay up.
If you ignore delinquencies too long, they will become your uncollectible ex-customers. You lose both ways.
This chart is an excellent reminder to address slow pays more quickly. Not every debt is collectible, but, on average, debts are 200% more likely to be collected if assigned for collection at 90 days vs. 360 days.
The best way to avoid debt-placement gridlock and the resulting loss is by establishing written collection guidelines and sticking to them. Here’s a simple example:
10 Days Late: Collection email #1 is sent when the customer is ten days past due.
20 Days Late: If the customer has not responded or made a promise to pay and followed through on it, a call will be made, supported by email #2.
30 Days Late: This communication will advise the customer we need payment in 15 days or we will have to hold orders. This is reinforced with email #3.
60 Days Late: The account is escalated to the manager, who will make a “final demand” before placement with a collection agency. This is reinforced with email #4.
75 Days Late: If no satisfactory resolution, Certified Letter #1 will be mailed,
90 Days Late: The account is placed with the collection agency.
Read more about late payments and delinquencies here.
Note: Smyyth’s affiliate, Leib Solutions LLC, is a highly-rated commercial collection agency.
For further reading, take a look at our post about the Statute of Limitations for Contract Debts.