Cash flow is one of the most important things for any business, but a small business’s life often hinges on nothing more than 3-4 payments that can be late. And, admittedly, sometimes customers don’t pay you for reasons you can’t understand, or worse, make obviously weak excuses. All this might tempt you to send them to aggressive collections and be done with them. Based on our experience, this can be a mistake. Consider this: customer retention and up-sell is immensely more profitable than acquisition. When you take what you had to pay to acquire a customer into consideration, not every short delay in payment requires an all-out attack. TrueAccord customers see more than $2 in additional business for every $1 paid by late payer we retained for them. That’s a big number.
This isn’t a plea to never fire customers. Some customers are bad for your business, suck your energy and shouldn’t be allowed to be your customers anymore. And, of course, we’ll be happy to go after any late customer for you. But keep in mind that some people may genuinely be in temporary financial issues, and do not know how to communicate that. Losing a highly profitable customer because of a temporary mistake will hurt you in the long run. Bad things happen to good people, too.
There are two scenarios where we recommend that you consider taking customers back:
When they paid in full after encouragement. It’s easy to think that late customers who didn’t pay on your first prompt are bad and need to be ditched. We don’t see that being the case. In many instances, customers who are referred to TrueAccord pay after their complaint or dispute have been heard. They want to vent their frustration – and it could be about something as simple as a rude customer care agent. We view ourselves as your outsourced retention department, and if we get someone to pay in full, they most likely did so in good faith. Take them back.
When they are on their path to pay in full. This case requires a bigger leap of faith, but providing a service to the customer on a pre-paid basis can go a long way to get them back on your platform. You have customers because they want your product or service, and they continue to want them even when they’re late or defaulted on a payment. Offering your goods with an upfront payment, once they’ve gone through enough of their payment plan, will provide them with more incentive to pay everything they owe you. Alternatively, you can demand collateral or personal guarantee, as part of your high-risk credit policy.
Beyond recovering lost fund, a recovery and retention service can help you sort the good guys from the bad ones. Remember – growing your business is your top priority; don’t let anger lead your decisions on who to work with. Develop a high risk credit policy or demand pre payment, and take the good ones back. Your churn will drop as well as your long term customer acquisition costs. And, as we keep mentioning, there’s a lot your can learn from your defaulted customers. Let us help you find that out.