Hopefully, you’re not closing your doors due to deadbeats who haven’t paid their bills. Still, as you prepare to shut your business down, you may be plagued by outstanding accounts receivable. It’s a vexing problem since cash flow, especially when you’re going out of business, is critical. So it’s particularly important for you to make collections a top priority. The challenge, of course, is coming up with a systematic approach for bringing in the cash.
Here are some tips for collecting those outstanding accounts receivable in an expeditious and professional manner:
- Create (and stick to) an aggressive collections plan. Unfortunately, you probably want to bypass some of your accounting system’s processes like checking credit references and reviewing your customers’ payment histories. Still, you need to have a plan, even if it’s simply to get you through the next six months (or whatever time you’ve allotted to close your doors). Put the plan in writing and share it with the employees who are part of the collections team.
- Start a serious e-mail campaign. Let your past-due account holders know that you mean business by initiating a friendly, though serious, e-mail campaign. Send reminders indicating the number of days that each account is overdue. Clearly, you’re asking to be paid, but you should also request that the recipients acknowledge your e-mail. Also, let them know that while you understand that they might be experiencing financial difficulties you, too, are a business owner who must pay vendors and suppliers. If you don’t get a response on your first e-mail, send another but this time copy your attorney. Sometimes that’s enough to motivate people to comply with your request.
- Be specific. Awkward situations often prevent us from articulating what we need. Indeed, it’s human nature to avoid specificities, especially when money is involved. If only people could read your mind (or their e-mail) and simply do the right thing. Instead of waiting, do the right thing for you and your company: be specific in all your communications. That means indicating dates and precise amounts. Also, don’t hesitate to communicate what your next step will be. In other words, be specific about the consequences.
- Strike a balance. Like all business dealings, it’s important for you to strike a balance between assertiveness and good customer relations. Certainly, you want to avoid alienating any of your customers — you never know when you might do business with them again and word-of-mouth never stops. You can be flexible and firm at the same time. On the other hand, this is business and if customers can’t fulfill their obligations, then you need to take the necessary steps to get what you need.
- Consider hiring a collections agency. You may not want to hire a collections agency, but doing so as a last resort may be your only chance of recovering your money. But don’t wait until the last minute to bring an agency on board. As you create your aggressive collections plan, gather a few names of reputable firms and have a staffer make some initial inquiries so that you know what to expect (including fees). You can probably expect to pay between 25 and 40 percent of the amounts collected.
- Consult with a collections attorney. A collections attorney will have specific expertise in collecting outstanding accounts receivable and will likely have the resources to pinpoint the debtor’s assets. Find out which options — time line and costs — will work best for you.