Sometimes it is really hard to tell if debtors truly can’t afford to pay, or if they simply won’t pay – persuade them to pay regardless!

Persuade: to convince by appealing to reason – this has nothing to do with misleading anyone, nor strong-arming them – Persuasion is about influencing and altering the way customers and clients look at you and your business.
Nor is persuasion only about one “heavy” conversation, strongly positioning yourself in all 5 areas will go a long way towards incrementally persuading all your debtors to pay on time.

Do you have trouble Persuading Debtors to Pay Promptly?

5 tips for persuading debtors to pay sooner

1. Authority

People respond to leadership and expertise.

An authority typically has business knocking at their door instead of the other way around. If you are recognised as a leader in your field you can usually charge higher prices which people will happily pay. Always work towards being a forerunner in your area, and even if you are just starting out, adopt a “no-nonsense” approach with every customer right from the beginning. Don’t shy away from giving Terms to every customer you issue invoices to. Even print a copy of your Terms on the back of every Invoice. Also make sure in the beginning of the sale you include a “quick chat” outlining your expectations about on-time payment – a short matter-of-fact discourse covering:

  1. When and how you will issue invoices – and confirm you will send the invoice to the right person who can pay the bill
  2. When and how you expect to get paid – highlighting your policies re discounts for early and penalties for late payment this usually prevents you getting the run-around later.

2. Consensus

People are guided by the crowd.

We look to the behaviour of other people and, like it or not, we are guided by the crowd.
Include in your terms and conditions discount for early payments rather than a fine for late payment – then publicise it… “80% of our customers take advantage of our on-time payment discount – this keeps our debt collections and bad debt costs low which lowers overall costs and keeps our prices down for everyone.” For more information on on-time payment discounts see Smarter Pricing )
This approach has worked to reduce the amount of taxes owed by UK citizens by more than a surprising 25% since 2009.

3. Reciprocity

People are far more likely to give back to those that have given first.

This is business – giving in this context mostly involves good customer service.
Have you delivered on time, did the product/service live up to the standard expected, was there good customer service follow-up?
Don’t expect your clients to pay your bills on time if you didn’t stick to your word and do what was agreed either.
On the flip side, people pay the people they like first – not the fairest side of human nature, but a true one, and one that you can easily work with to your advantage simply by being nice!

4. Scarcity

People want more of things they can’t get.

We’re more inclined to take action if something is rare or exclusive … Work towards setting your business apart then let people know you have lots of good paying customers and so you are happy to let bad payers go elsewhere.
Be Strong, a bad debtor is not a customer – Don’t be afraid to walk away it is better to have no customers and spend your time building a good pipeline than DONATING your efforts for non-customers who WILL NEVER PAY!!!

5. Consistency

People are creatures of habit.

If customers have specific plans, values or needs they are likely to stick with them.
So ask questions and then listen; if the conversation is around how tight things are, delve into the client’s intent or habits about paying on time – if they are always slow payers then most likely they will be slow in paying you.
Make sure you manage any non-complying debts consistently, tell potential customers about your process, have the staff follow that same process – if you say you will ring every 5 days then do just that!
Have a process and a telephone script for bills nearing due date and those overdue – we use one like this, but you can adjust the timescale according to you own needs):

  • – 2 days before due – issue an SMS reminder, or email: “A quick note to let you know your invoice is due tomorrow and remind you to take advantage of our “pay on time” discount”
  • + 5 days past due – re-email the invoice, with a reminder call : “this is a courtesy call to say you have unfortunately missed the “pay on time discount”, however if you pay in full by COB today we will do xyz (this can be a choice of continue work, or not charge any late fees, etc)”
  • +10 days overdue make a debtors call using this script: “Hi I’m sure you know our terms require payment within 30 days and you have now had our invoice for 40 days – I’m calling to reiterate that slow payers make it more expensive for us to run our business which leads to price rises; and I am sure you don’t want to be the cause of our next price rise… So I am ringing you to help you settle this in full now, over the phone.” If they give an excuse “I can’t pay the full amount right now” be very quick to answer with “Well – how much are you short?”
  • 15 days overdue make a debtors call using this script: “Hi I’m sure you know our terms require payment within 30 days and you have now had our invoice for 45 days – as it appears to us that you are struggling to meet your commitments, rather than creating more stress on your business we have decided to offer you a payment plan… How much are you short each week?”
  • +30 days overdue – send a statement, include a covering letter with the intention to hand the invoice over to a debt collector or collection agency within the next 30 days. You may also want to repeat the offer made at 15 days.
  • +60 days overdue – hand over to a debt collector or collection agency

Do not at any stage offer any extra discount for full or quick payment unless both these apply: i) you think you have a very low chance of collecting this debt and you do not want to put any more effort into it, AND ii) you are not intending to do business with these people again. Offering a discount for full payment on an overdue invoice is REWARDING you debtor for paying late, and setting up the expectations that in the future late payment well also lead to another discount. Discounts should be negotiated up-front as part of the deal, not tacked on at the end, if you do discount to collect cash, make it clear that is the end of your business relationship (or change your prices for this customer next time to “build-in” an amount to offset any discount expectations….

Looking for more Debtors Help?

The best question to prompt a late payer – ‘How much are you short?’

CLIENT: “I can’t pay the full amount right now”
YOU: “Well – how much are you short?”
People generally wont lie to you, nor will they want to loose face and say “I don’t have any money at all”, and often they haven’t been asked this question before so it will probably catch them off-guard and prompt an honest answer. By understanding what they can’t afford to pay you become very clear about what they can pay right now, which of course you are able to collect on the spot.
I have used this approach when things have gotten “serious” and it always works a treat.
For more details on changing your communication see 3 tips to Increase the Flow

Keeping good file notes about the debtors calls – include, at a minimum for every call: date, time, name and title of the person spoken to and the exact details of every conversation also prevents any misunderstandings and minimises push-back and the runaround when collecting debts from larger organisations. Set your business up for success by using every aspect continually across your client dealings.
It will take a bit of practice to adjust your language, improve your processes and to be confident when you need to be persuasive. But being in business is a long term game, and using all of these techniques will give you a much greater chance of winning.

Do you have a tried-and-true method for being persuasive?

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