Optimize Collection Management is one of the most important tasks of any company, whether it is a startup just starting or a company already positioned in the market.
However, it is an uncomfortable process and one that can seriously harm the company’s treasury.
A late or non-payment of an invoice can be a real challenge. The business must resolve the situation as amicably as possible while ensuring that the customer pays.
Considering the importance that this has in the financial health of the company, collection management becomes a key factor for any business.
Unfortunately, there is no universal solution. But there are some strategies to make collection management easier and more effective and reduce your customers’ delays, forgetfulness, or errors.
4 Steps For a More Optimize Collection Management Process
Notify your Client before the expiration date
“Prevention is better than cure,” and it is from this perspective that you must approach the situation.
That is why it is best to contact the client before the due date of the invoice, preferably a few days before, and remind him that the due date is approaching.
This way, you will know, from the response’s content, whether or not your client plans to pay on time. This is what is known as “preventive collection.”
Keep in mind that it doesn’t make sense to apply this strategy to all clients.
It all depends on the size of the company, the value of the invoice and the customers themselves, and their payment history.
For example, for clients with a good history, it is not necessary to carry out this procedure.
However, for those more problematic clients or larger invoices with a greater impact on billing, this step can be vital to avoid delays or mistakes affecting your cash flow.
If you have decided to send an email, be careful with the form and content of the message. Poor communication can convey a certain mistrust or cause your client to misunderstand the situation. Always use a friendly tone and use this reminder to reinforce your relationship and know if your client needs something else.
Another option to avoid misunderstandings is to resort to telephone calls. In this way, you will also help strengthen the client’s relationship.
Create a Collection Ranking to Define your Priorities
Another important step in optimizing collection management is creating a collection hierarchy. The efficiency of this process is often quite affected by a lack of organization and planning, so it is important to set priorities.
Create a collection ranking that includes all customers, from those who pay on time to the most problematic. This will let you know which ones you will have to dedicate more time and effort to collect the invoice as soon as possible.
In addition, in this way, you will have a much faster response capacity, and you will be able to prevent more complicated situations.
Automate Your Collection Processes
Automating your collection processes will allow you to save time and resources and be much more efficient. A good example is the configuration of automatic notifications to send to the client before and after the payment deadline.
Another solution to make your collections more efficient is online payments. Offering your customers other alternatives will facilitate the payment process and save time in the collection process.
In addition, with management software, you can also receive insights into the average collection period. Thus, you will be able to know the status of your treasury, detect difficulties, and prioritize clients.
Offer Various Payment Terms.
Considering that each client is different, it is important to offer different payment methods to facilitate the process. In certain cases, you can propose payment in installments to help customers with more difficulties in meeting their obligations.
Another solution may be to offer a series of advantages to those who anticipate the due date, such as a discount for prompt payment.
Online payments are another way to facilitate your customers’ payments and make collection easier, faster, and more effective. In addition to payments by credit card or PayPal, you can also opt for direct debit.
If your client authorizes it, the collection process becomes practically automatic. It is enough to issue a SEPA file and coordinate with the banking entities to make the collection without having to be behind the client.
We hope, you have enjoyed our guide.