Last time, we looked at how you would remind your customers about an overdue account when your philosophy did not involve sending statements.
The first option we looked at was the telephone. There is no doubt that the telephone is effective in collecting money quickly but the drawback of this option is the cost, particularly in terms of time and the possible negative effect on repeat sales. Good customers do not appreciate receiving phone calls about an account that is just a couple of days overdue. It is too confronting so a softer approach is recommended.
There are three softer approaches. The first method is unsophisticated yet effective. Simply, reprint the invoices for the overdue accounts. The disadvantage of this option is that the printing, whilst inexpensive may be time consuming. You only want to print those invoices where the account is overdue, not those that have been paid or are still within your trading terms.
However, once the invoices are printed, you have the same options available as if you were sending statements. You can post the reprinted invoices in a window envelope. Also, you can make these more effective by including an early reminder sticker on the invoice. This is much more economical than sending a covering letter with the invoice.
This method of collecting money is rarely used. This is because if you rely on the mail to collect your money, then you are better off having a software program and special stationery for your statements. In fact, you do not even need special stationery. You can just use your software program to create the statement for you.
A new form of technology is the fax broadcast. It is used more and more for marketing purposes but is rarely used for collecting money. There is no reason that it can’t be. It would be time consuming to reprint invoices and write separate faxes but technology now allows thousands of personalised faxes to be sent instantaneously. You can include the person’s name, the company name, the fax number and even important details like invoice number and account balance. Faxes are less effective than mail but are also less expensive. I have used this successfully to market my products but have not used this for collecting money.
The next method of collecting money which has some use is the email. Some invoices are sent by email. However, it is a less effective tool in collecting overdue accounts. The risk is that your email will be ignored. We are receiving more and more emails every day so your customers are looking for reasons not to open your email. No one has the time to thoroughly read every email they receive.
Of course, the big advantage of the email is its cost. It is not necessary to send separate emails to all of your customers. This would be time consuming. As with the fax broadcast, you can include personal details such as name, company name, email address, invoice number and amount owing in an email broadcast to all customers with overdue accounts.
Collecting money is only slightly different from marketing your products or services. In collection, you are persuading your customers to pay for the products or services. In sales, you are persuading your customers and prospects to buy your goods or services.
When collecting money, you are looking for a direct response. The four most common media used in direct response marketing are:
- The telephone
- The mail
- The fax
In marketing and in collection, in terms of response, the telephone will beat the mail. Mail will beat the fax. The fax will beat the emails. However, the reverse is true in terms of cost. As with your marketing plan, your collection plan should be applied so as to balance the costs with the response.
In marketing, you also have many more ways of marketing your brand and your products but for collection, you really are restricted to these four forms of media. Of course, there is one other way to collect your money which will even beat the telephone for response. You can call on your customer in person. It is unlikely you would use this method for an account that is just a couple of days overdue.
This is what I do. I do not use emails or faxes to collect my money. I initially use the mail. I do this at 30 days, 45 days and 60 days for overdue accounts. Then at 75 days, I ring my customers. However, the three reminders in the mail collect almost all of my money so the telephone calls can be done very quickly since virtually all of the money is collected by mail. This way, everything is automatic. The only manual thing to do is to decide which stickers go on which statements. This method keeps my collection costs low and helps my repeat business. My customers know I won’t hassle them on the phone immediately the account becomes overdue.
By Ian Renton of Australian Credit Stationers