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Handling Collections Without Losing Customers

It’s a tricky balance. You want to extend a line of credit to your contractor and commercial customers, but you also need to get paid. When they’re slow to pay, how do you get your money without making your customer upset?

When it comes time to make that phone call and ask for your money, there are a few strategies that can make that conversation easier.

Get the conversation started early.

Don’t wait until the bill is past due to check in with the customer. Have a check-in phone call a couple of weeks before the bill is due to remind them of their balance and ask if there are any issues that might make payment difficult. Don’t use this check-in only to talk about money, either. Ask them how business is going and if there is anything they need from the store. Sometimes, your customers may have had issues come up that make paying their bills difficult. Start this conversation early and it will save frustration in the future.

Put the right person in charge.

Be choosy about who will be in charge of financial accounts and who will make the collection call. Some retailers prefer the good cop, bad cop approach. Don’t make the sales person make the collection call. Instead, have the store manager or owner make the call.

Keep the conversation going.

Don’t stop making phone calls once you’ve started. If an account is consistently delinquent, make a habit of calling them every month. Have the conversation on friendly terms, remembering that you want them to be your long-term customer. You might also want to offer incentives for staying up-to-date, such as product discounts for those that keep their accounts current.

Hold your ground when necessary.

Sometimes, you just have to suspend an account until they pay. Sometimes you have to suspend them indefinitely until they have special approval. Getting the conversation started early might help solve the puzzle as to why someone hasn’t paid. For example, a customer might not have paid because they thought their amount owed was so small, they would just wait another month to pay.

If it doesn’t work, change the system.

If handling collections is too much of a headache, start cutting back the number of accounts you allow. Credit cards are easy to get. You may want to tell some of your low-bill customers that you are no longer able to offer as many credit accounts as before. You might also look into getting a private label credit card. The card company will do your collections and keep cash back in your cash flow.

About Jesse Carleton

Jesse Carleton has visited independent hardware retailers, conducted original research on the industry and written extensively about the business of hardware retailing. Jesse has written for more than a dozen of NHPA’s contract publishing titles, all related to the hardware retailing industry. He also was instrumental in developing the Basic Training in Hardware Retailing courses now used by thousands of retailers across the country.

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