Good Habits to Keep Delinquencies Low

No matter the size or line of your business, one of the most significant and frequent problems you will, unfortunately, have to face on one or more occasions is delinquent clients. Did you know that just one client's delinquency is enough to destabilize liquidity, limit solvency, hinder the ability to continue work, and prevent your company from meeting fiscal and administrative responsibilities?

But don't worry! There's a series of actions you can take to make a habit of them and avoid falling into bad practices caused by the delinquency of third parties. Keep reading to find out what you can do to prevent delinquencies with your customers.

How to Prevent Delinquent Customers?

You can quickly identify a delinquent customer through your monthly reports or follow up directly if necessary. Once you label an account as such, it will need more than just essential communication for both parties involved (company & client) to feel comfortable again.

The best thing you can do to avoid this situation is to prevent it. It is not easy to avoid delinquent customers, but you can try to stop them by implementing these strategies and good billing habits.

Investigate and Segmentate your Clients

One of the best ways to avoid delinquency is to manage customers according to a segmentation established from previous research.

This research and subsequent segmentation will help us to design a database so that we can manage the catalog of customers according to the dates on which they have made their payments and other factors that may indicate their level of compliance and delinquency.

It is also possible to segment according to the cause of the arrears and the attitude shown by customers. For example:

• Customers who want to and can pay
• Customers who want to pay and cannot pay
• Customers who are unwilling and unable to pay
• Customers who do not want to pay and cannot pay either

Knowing the types of delinquent customers and their characteristics will allow you to identify which ones fall into which category in your database and how best to deal with them.

Preventive Collections

This type of collection management is applied to the portfolio of customers that, after analysis, detected a high risk of default. Among them, we have new customers, over-indebted customers, and customers with economic difficulties. This management generally aims to generate customer payment habits and minimize uncollectible AR.

The importance of applying preventive collection to the client portfolio comes from the results obtained in developing our client segmentation. It makes it possible to detect in-time problems that would later be the leading causes of non-payment.

This type of collection offers the possibility of increasing the recovery of overdue AR through permanent communication with customers since it is necessary to follow up immediately after generating the invoices.

Send your Invoices on Time

There is an overwhelming logic here: the sooner you send an invoice, the sooner you will get paid.

Many companies begin to manage their collections once the invoice is overdue. This reactive attitude delays the time it takes to become aware of problems and therefore lengthens the company's collection deadlines. You should send the invoice when you deliver a project to your client or close a sale. Not only will it help you get paid sooner, but you will also avoid possible forgetfulness.

It is also crucial to facilitate the interpretation of the invoice to avoid excuses or misunderstandings.

Implementation of AR Automated Processes

Implementing an automated system that gathers, analyzes, and monitors all data can solve many of the problems experienced in AR management.

Incorporating a collection management platform allows complete control over the accounts receivable and speeds up the decision-making process regarding the portfolio of delinquent AR.

Automating the sending of collection emails and notifications, issuing the concepts to be paid, and even sending payment buttons are simple actions that help reduce the portfolio of delinquent accounts receivable considerably.

How to Handle Delinquent Accounts?

Even if you apply all the collection strategies for delinquent customers, there is always a tiny chance that some users cannot pay their debt. When faced with this critical circumstance, there are two last steps to reach an agreement with the user.

Negotiate the Debt

Knowing how to collect a debt is essential to negotiate with end users. The agents must contact them simultaneously when they don't make a collection in arrears. This way, it's possible to know why they didn't make the payment.

The main reason for non-payment is that the customer forgot to pay or did not see the reminder. However, what happens if the customer cannot deliver due to a lack of money? If faced with this problem, you should take measures that suit the customer's needs. For example, you can do the following:

• Delay payments: ask the customer how soon he will be sure he can pay what is pending. Depending on the client's response, you should reschedule the payment.
• Split payments: in case the payment of installments is very high, you can give the option of splitting these amounts or creating minimum payment processes. This way, you ensure a part of what you should be paying monthly.

Recovering debts does not have to be an unmanageable or annoying process. It all depends on how well you can negotiate or dialogue with the client.

Resorting to Legal Proceedings

This is the most critical part of any debt collection request. If the user does not want to pay, you must resort to your country’s legal instances. You should note that this instance is only resorted to when all other options have been exhausted to help the end user.

Even if it is an unwanted process, look for exit routes with the clients. This way, they will not feel completely abandoned.

The negative impact of bad debts and delinquent customers on your business can be devastating as it may hold up daily operations and affect profitability. Finding the right balance is critical to maximizing your company's results.

The simple actions previously exposed will allow you to keep better control to avoid late payments from your customers, but if you feel like you could use a hand with your collections and billing processes, remember that Paystand can help through:

• Zero fee payments
• Flexible invoicing
• Multiple payment methods
• Customizable collection plans

Don't let your customers' bad habits slow down your business growth. Adopt good collection habits and improve your AR efficiency by booking a demo with one of our specialists today.