For small or large organizations, customers are the main source of success. A successful company will depend on how their customers perceive them, how they are able to retain customers. So, to attract more customers and increase retention, companies try to provide all the possible solutions for customers to make purchases and one such solution is customer financing. Many small and large organizations have started opting for customer financing to retain customers and reduce cart abandonment. However, these consumer financing for small businesses plans have one issue that businesses often face that is bad debts. When customers select financing options, companies do not know when and how the customers will return the amount. Although, the customers are tracked and all the secured installment financing methods are used. However, sometimes customers are unable to pay due to many reasons. So, companies need to plan for restoring business financing for customers and various ways to deal with bad debts in case of non-payment.
Here’s how a small business offering financing to customers can deal with non-payment and restore financing-
Automated follow-up options– Some people simply forget to make installments or payments. Using an automated follow-up option provides them a reminder to make payments. Automated follow-up in consumer financing for merchants sends personalized messages to customers through mail or SMS reminding them about upcoming installments or non-payment. This reduces the hectic of companies to make calls to every borrower every time the payment date is approaching. To make the process more streamlined, you can add a payment link or integrate payment options with an automated follow-up message.
Manual follow up– If your automated follow-up is not working which means despite several SMS and emails, the customer is not paying their installment, manual follow-up is your next move. Try to contact them by phone call and give them a polite reminder of the payment. Being rude during manual follow-up in customer financing for small business will make you lose your customers forever, and chances are they might post a bad review on social networking sites which will hamper your reputation.
Penalties– if despite your reminders, the customer is not paying your debt, you can consider imposing a certain fee or penalty for the late payment. You can remind the customer and inform them that after a particular time such as 15 or 30 days of late payment, you will charge extra. It will create little fear as no customer would like to pay extra.
Tech-driven financing- if you have enough finances to invest, you can use tech-driven financing options for tracking the customer. It will help you recover bad debts more quickly. Companies can locate financing customers by using various sources such as telephone numbers, address links, emails, or additional information. You can track down the customer financing programs for small business and recover your bad debts.
Additional warnings- if despite your reminders, fee penalties, time passed and customers do not pay back or they do not inform you about any emergency, or they fail to make their promises, now is the time to take this matter seriously and handle the situation in a different way. Because phone calls, emails, or SMS are not working that means you are going to have difficulty with recovery.
Contact collector agency- After warnings and all other penalties, you will need to contact the collector company or agency expert in recovering such bad debts. They might help you with collecting payments from the customers who are constantly avoiding this. These collecting agencies are experts in such types of collections, they will send their employees to your customer’s address to demand payment directly and give warnings if necessary. Many customers often make payments to the collecting agencies and most probably you will be able to recover your payments of business financing for customers.
Legal action- Final action, if even after your constant warnings, phone calls, penalties, and the efforts by the collecting agency, the customer refused to pay then you need to take aggressive action to recover your bad debts, especially those customers who owe a large sum to your company. Send a legal notice through your lawyer and they can proceed further with the procedures and consequent actions.
To wrap up – These are some of the effective ways to restore your customer financing or recover your bad debts. Some businesses stop their consumer financing for businesses or do not adopt this technique due to bad debts. However, Customer financing is a great way to attract customers to your platform and reduce your cart abandonment to a huge extent. When you provide customer financing, you are bound to come across some bad debts. These tips or approaches are the best ways to cover your bad debts and improve your business growth.