I recently interviewed Paul Metcalf from Collect More on my radio show and it was quite interesting to discover the 4 main reasons why people do not pay bills:
- The customer has forgotten, and this is where reminders are vital.
- They can’t. They just don’t have the money to pay.
- They don’t want to. They aren’t happy with the job, the service, the product. Whatever it is, there’s a dispute.
- They don’t need to. They know they owe you the money, but there’s nothing forcing them to pay, you’re not creating urgency, there’s no consequences if they don’t pay. If you’re sending too many reminders, they’re just going to ignore them. They benefit from seeing the money in their account. A lot of people just like seeing money in their account.
During the interview we also discovered that 20% of customers forget that they owe a supplier money. Two great tips that Paul suggested are:
- Set up automatic reminders to your customers in your accounting system. It is quick and easy to set up and the program does it for you.
- When you call a customer about an outstanding debt and they do not answer, then call again straight away. Two missed calls creates that sense of urgency, they think ‘this guy really needs to talk to me then they’re going to remember that they owe him money and then they’re going to pay.
Now an interesting fact that I didn’t know is that Australia is the slowest paying country. On average invoices are paid 26 days late. Mmmm, makes you think why, since we are one of the richest countries in the world.
What often happens is the reason they can’t pay you is because they’re owed money. And the reason their customer can’t pay them is because they’re owed money. And the reason a customer can’t pay them is because they’re owed money. And it’s just a vicious cycle that goes around and around.
So how do you get around this? That is where offering payment plans is the way to go. If your customer says to you, I just can’t pay you now, work with them. You just want transparency. The most frustrating thing is the monitoring and the not responding.
Paul also suggested some strategies to avoid or reduce those ‘don’t want to pay’ problems:
- Ask the customer which portion of the invoice are they disputing? It’s never usually the whole amount. It will always be a portion of it.
- Figure out the cost of the other portions and ask them to pay that, then offer to fix the other problem.
If you would like to listen to the interview in full, you can do so here.
Want to get in touch with Paul? His website is www.collectmore.com.au.