10.07.2021 | Posted by Erik
Final Steps to Take If You Can’t Get Paid
You’ve done all the right things to try and collect outstanding accounts. You’ve already:
- Sent several payment requests to the right contact
- Tried calling and emailing
- Worked your way up the ladder to the person in charge
But, you still haven’t gotten paid. What now? As an outsourcing accounts receivable management company, we run into this situation from time to time. When you’ve done everything that you’re supposed to do, and it hasn’t worked, it’s time to escalate.
But what does that look like? What steps should you take to get the past-due invoice paid?
4 Best Practices for Escalating and Getting Your Past Dues Paid
When an account is past due, you don’t want to jump to aggressive tactics right away. There’s often an amicable solution for both parties that results in you getting paid and a bridge staying intact.
But, there are times in outsourcing accounts receivable management where we have to pull out the “big guns” to get your invoice paid.
These four tried-and-true strategies are what we turn to for collecting outstanding accounts once we’ve exhausted our normal process.
1 – Appraise Each Account Individually
There is no hard and fast rule about how long to wait before taking the final steps. For example, if a company is still working with you to satisfy their debt, you probably don’t want to escalate yet. But, if they’ve stopped answering their phone, it’s likely time to consider other options.
You should also carefully weigh your future relationship with a past-due customer. Escalation tactics often burn bridges between companies, so you must be willing to lose them as a customer if you intend to become more aggressive with your collections approach.
Larger past-due amounts may need to be escalated more quickly, especially if it’s affecting your cash flow. Small amounts may not be worth escalating and can be written off. Still, there’s really no downside to turning any amount over to a collection agency.
Here at Axim, we use a trusted collection agency partner that gives better rates to our clients. Our partner will pursue all outstanding debts, regardless of amount, so there’s really no reason not to give them the chance to collect.
2 – Send a Demand Letter
Once it’s clear the company isn’t responding to normal means, we send a demand letter on our customers’ behalf, in our name, to illustrate the seriousness of the situation. This letter should say something like, “We have exhausted all efforts to collect this invoice, and before we take more extreme measures, we are making one final effort to secure payment.”
When sending a demand letter, send it via mail, fax, and email and give a hard deadline for them to get back to you (ten days is standard).
3 – Send Them to a Collection Agency
If the deadline in the letter passes, it’s time to consider sending the account to a collection agency. Our collections partner is backed by attorneys, with the power to take legal action and pursue other more severe measures to collect the debt.
Often, the non-paying company is on its way to being or is already out of business, but on occasion, they’re just refusing to pay. In this situation, the collection agency may be able to get a judgment to withdraw funds from the company’s bank account by proving the business is still in operation.
4 – Decide What to Do with the Customer
Once you receive payment in full, you’ll need to evaluate whether you’ll work with the customer again. In most cases, the collections process effectively ends a working relationship between two companies. If you decide not to work with them again, deactivate their account or notate it as soon as you send them to collections. Make sure this is a documented part of your processes.
Additionally, before taking on any new customer, your credit department should always conduct thorough credit investigations to ensure a previous customer you have decided not to work with hasn’t gone bankrupt and started a new company under a new name. This is rare, but it does happen on occasion. (This is something we can do at Axim if you’d like help determining your customers’ creditworthiness).
If you decide to work with the customer again, get paid upfront on future jobs and don’t ship anything until they pay.
Consider Outsourcing Accounts Receivable Management to Handle Collections
Here at Axim, we help companies avoid sending their customers to collection agencies with a proven track record of getting accounts back on track. Our goal is to prevent escalation techniques by taking a customer-centric approach to the collections process so your customer relationships and bottom line stay in good shape.
But, as an accounts receivable outsourcing firm, we know that sometimes accounts require more aggressive tactics to close. That’s why we partner with a reliable and trustworthy collection agency to ensure our customers always have the best chance to collect what they’re owed.
Whether you’re already in the final stages of collection or want to avoid them, we can help. Contact us today for a free quote.