Sales Management Digest

What to Do When the Customer Can't Pay
Heather Baldwin
It's a common theme these days: Your company mails an invoice to a customer and 30 days pass with no payment. Another invoice goes out and another 30 days pass. Now what? At most organizations, the next step often involves a strongly worded letter, but that's the wrong approach, especially if you want to preserve the relationship with your customer, says Shep Hyken, a speaker and best-selling author of The Cult of the Customer: Create an Amazing Customer Experience That Turns Satisfied Customers into Customer Evangelists. Instead of taking a tough stance when an account goes unpaid through two billing cycles, get the sales rep to pick up the phone. It's a simple act that can have some surprising results.

"It's almost becoming normal to be past due," observes Hyken. "When you pick up the telephone and say nicely, 'We haven't been paid and I wanted to find out what's going on,' [customers will] often send the check right out. In my experience, all you have to do is ask, and in most cases you'll get paid."

The reason: These days when cash is tight, many organizations have internal policies of holding bills for a certain number of days – say, 90 or 120 – but include a caveat to pay those bills if the vendor calls. "I've had very few clients with a cash flow problem that's so bad they can't pay at all," says Hyken.

Still, those clients are out there – and in those cases, again, Hyken urges you to talk it through and work something out. "If they're truly strapped, come up with a way for them to pay over time," he says. "They'll be so grateful."

Hyken recently ran into this very situation. A client needed a video project done quickly. Hyken did it and sent the $15,000 bill but was not paid. About 45 days later, he sent a second bill. When still no payment arrived, Hyken says he picked up the phone and put "a nice squeeze" on the owner of the company.

"I said, 'Look, I don't need to know all the details of your situation; I just need to know I'll be taken care of.' "The customer was so grateful for Hyken's willingness to communicate and come up with a payback plan that worked for both of them that he now recommends Hyken to others.

So why doesn't a letter cut it when a customer's payment falls behind? It feels impersonal. It puts the customer on the defensive, and the tone can be misunderstood.

"You have a higher likelihood of being understood and perceived as empathetic over the phone or in person," says Hyken. And that's important, both in maintaining your relationship and getting someone to write a check.

Here are some final points to consider:
  1. Don't leave past-due bill collecting to the accounting department. Your sales reps worked hard to make the sale and establish a relationship with the customer. It is critical that the sales rep be the one to pick up the phone and find out what's going on.

  2. The rep's first call should be to his or her champion – the person in the company with whom your rep worked most closely. Often, that person can fix the problem; when he or she can't, "go to the top," says Hyken. "Higher-level executives can make a decision. And if you're open to talking, they probably will be, too."

  3. Remember that not all customers are worth keeping. Sure, you want to take the high road to preserve your own reputation, but don't waste your reps' time with low-profit, high-maintenance customers. After a call or two, pass it back to accounting if the rep isn't having any luck.
For more ideas, visit www.hyken.com.
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