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While hardwood flooring professionals use their critical tools and expertise to work with customers to create a beautiful floor, they’re not always equipped with the best tools and expertise to handle their accounts receivables and collections.
Accounts receivables can be challenging at times for many different reasons. Contractors face consumers not being home when a job is completed, change orders or upgrades that increase the original estimate, insurance delays and more. Collecting on commercial accounts poses many of the same issues, as well as slow-paying general contractors who hold up payment to businesses because they are behind in their own internal accounts receivables.
Implementing the following simple tips can go a long way in improving the cash flow of your business.
1) Establish a Standard Payment Policy
Always inform your customers of your billing process and follow-up procedures. An itemized list should be signed before services are performed or products are delivered to show that you are both on the same page. This method manages the customers’ expectations by letting them know how and when they will be billed and the time frame in which they are expected to pay. By communicating your payment policies verbally and in writing, you eliminate uncertainty and surprise when a bill is received. Eliminating surprises helps reduce the number of unpaid accounts.
2) Have the Customer Sign For Upgrades or Special Orders
You can’t afford confusion regarding change orders. Too many times the customer seems surprised and upset because they were not prepared for the accompanying increase in cost when the scope of the job goes beyond the initial bid. This leads to disputes and delays in payment and causes frustration on both ends. By having the customer clearly sign off on any changes and the amounts that correspond to each change, you can reduce or eliminate surprises and disputes.
3) Mask Collection With a Service Feedback Call
Although it sounds too good to be true, it is possible to collect debt and keep your customers. Many hardwood flooring businesses are small operations focused on customer satisfaction and maintaining their reputations in the community, so collecting overdue funds from a customer creates a challenge. There is a fine line between maintaining good customer relations and collecting the money you’re owed, and many small businesses will even write off debt to avoid alienating customers and damaging their reputations. Acting early on overdue accounts, diplomatically, lets the customer know you are firm about settling their account as well as maintaining the relationship.
Even with great employees and solid payment policies, some stubborn accounts remain unsettled. There are a few customer service-based approaches that are effective in recovering money owed to your business in these tricky situations. If an account is 30 days delinquent, a customer service call is an effective way to reach out to a client and also allows you to get feedback regarding the job. This call can help you understand why a client is delaying payment. This approach is sincere and can expedite recovering payments.
4) Get Help
Regardless of your approach, there will always be times a customer simply will not respond to requests for payment. After 90 days, it is wise to seek outside help from a collection agency, and using an agency should be part of your established process. Look for a reputable collection team that is a good match for your business and has your values in mind. Look to hire a third-party collection agency that:
- is diplomatic and tactful
- communicates with your customers
- frees up staff time
- gives you access to your accounts onlineÂ
- has industry experience and a reputation for high recovery rates.
Running a small business is challenging enough without having to constantly chase down those who owe you money. But any business that issues credit in some form will, at times, need to be more assertive in their collections. Having solid internal procedures and a third-party team ready to assist you will dramatically improve your cash flow.
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