Collections tips for small business

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Extending credit is one way to attract new customers.

However, any business that grants credit will be faced with the problem of bad debt at some stage. A well thought out collections strategy can make dealing with delinquent customers much easier.

CFIB offers the following tips:

• Remember your client owes you money. You have supplied them with goods and/or services according to a contract. They have a responsibility to pay you.

• Be friendly but firm, never hostile, abusive or threatening. Assuming this is a customer you want to keep, find out what's causing the delay in payment and work out a plan that is acceptable to you both. You will not only have a good chance of getting paid, you'll also have earned a loyal customer.

• Draw up contracts and ask for purchase orders. Have customers sign an order confirmation form detailing the product or service to be provided, price, delivery date, and the payment due date. Set an overdue schedule and send out overdue notices and the corresponding paperwork at the same time every month.

• Remember to document every invoice/account. Having a complete history on customers (accounts paid on time, accounts paid late, any related phone calls or letters) helps in future dealings.

• Billing mistakes almost always result in delays in payment and can sometimes create ill will in customers. As a standard part of your billing procedure, double-check invoices to ensure all information is correct and clear.

• If customers have e-mail, offer to bill them electronically.

• Enlist your sales staff. They may have valuable insight about how to reach a certain company. It is also important to let them know what is going on within an account.

Many business owners often feel uncomfortable when dealing with chronically slow payers. However, overdue accounts and debt collections are a part of doing business.

Setting high standards and clear policies within your accounting and collections department will help ensure you are paid, leaving you time to do what you do best: run your business.

CFIB is Canada's largest association of small- and medium-sized businesses. Encouraging the development of good public policy at the federal, provincial and municipal levels, CFIB represents more than 105,000 business owners (4,500 of whom are located in New Brunswick) who collectively employ 1.25 million Canadians and account for $75 billion in GDP.