One of the most dreaded tasks that a staffing agency owner has to do is call clients and ask them to pay overdue invoices. Collections are a reality of modern business that makes a lot of people very uncomfortable. Despite this discomfort, collection is a critical part of your agency operation. If you don't pursue collections, your agency's profit margin will suffer.
It All Starts Before You Extend Credit
Do you have a well-established credit policy? If you don't, then that is where you have to start.
A credit policy makes expectations clear for your client and for your employees. It lays out invoicing, acceptable forms of payment, payment terms, deadlines, and credit lines. Without such a policy, there is too much wiggle room for clients who don't want to pay on time. It also tells your employees what is expected and when a client has moved from late paying to being in collections mode.
Check each client's creditworthiness before extending credit. And recheck it every year. A client may be in good financial shape one year and in dire straits the next.
Before Heading Into Collections
When your staff do work for a client on credit, you need to provide your client with invoicing and documentation promptly. It sets expectations. Waiting a few weeks to provide an invoice tells the client there is plenty of time before there is a need to pay it.
Be sure that you send the paperwork to the appropriate person. You may find that the client company requires its payables be sent to a third-party address. If you send it to the wrong location, it will only delay the process of getting paid.
Always know the person to whom you need to speak with about payables. Sometimes, it is the owner. Sometimes, it is the accountant. Sometimes, it is a third party. You don't want to wait until you need to make a collections call to find out to whom you need to speak.
Time for Collections
Making a collections call is a skill that you have to develop. It is not something which comes naturally to most. There should be no guilt or pain in making a collections call. Your agency staff provided services and you have already paid your staff for their time. You deserve to be paid.
The goal of any collection call is to get the client to acknowledge the debt and to come to an agreement on when it will be paid.
Here are a few things to keep in mind:
- Always remain professional. Getting petty or personal will only inflame the situation. A professional, confident tone sets you up for a successful encounter.
- Be persistent and don't accept excuses. There may be times when you need to be flexible, but don't let a sob story prevent you from collecting what is owed to you.
- Be prepared for emotion. Many clients are embarrassed or frustrated due to being behind on bills. Some will pour on the crying or anger to get you off the phone. Being polite, yet persistent, is the way to move past the emotion.
- Make collections calls a part of your routine. By making it routine, it will be easier on you and let you stay on top of what is overdue.
- Be prepared with account information when making a call. You want dates and amounts at hand so you can counter any argument the client makes.
- Document everything they say in writing, copying them by email or letter. This helps to provide a track of your interactions in case you have to send the account to collections or small claims court.
Know When to Call in the Professionals
You can become proficient in making collection calls, yet you will have some accounts that you cannot collect. Be prepared to call in the professionals when this happens. Establish a working relationship with a collection agency who can take those accounts off your hands.
Running a staffing agency can be rewarding, but it does come with occasional unpleasantness. Collections is something an agency owner needs to know how to do. However, there is a way to make it easier.
One of the benefits of factoring your invoices is that the factor will handle most of your collection needs. If a client fails to pay an invoice, the factor's staff will call, not you. It can be a big relief.
Are you falling behind on your collections? If so, consider your options.