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Debt: The unspoken strain on Business/Client Relationships

  • Written by Bill Mali

Any type of relationship takes work no matter what form it takes. Managing relationships with clients requires a particular set of skills that can be a balancing act with very high stakes. To be frank, clients have the power to make or break a business’s bottom line.

To ensure customer retention, businesses often rightly place due focus on ensuring seamless onboarding processes, active communication and product satisfaction. However, one of the most common areas where professional relationships break down is over debt. It’s this critical aspect of the customer journey that is often overlooked.

Any time you’re dealing with a large number of clients, it's inevitable that you will have to chase up payments or deal with customers who are late to pay. Traditionally, the debt collection process has been fraught with challenges, typically resulting in strained communication, bad experiences and negative emotions from both parties. Unfortunately, it almost always ends in the subsequent breakdown of the relationship.

These suboptimal reactions to the process are not completely surprising. It is a touchy subject for many and often associated with a lot of shame. This is because the notion of being ‘in debt’ is still widely considered a personal failure and as such, attitudes can make the process a lot more emotionally difficult. Further, the dynamic between a business demanding payment and a customer expected to comply feels completely unnatural.

Not having adequate strategies in place for debt collection is a significant risk for businesses. Despite this risk, a report by the Australian Securities and Investments Commission (ASIC), found that almost half of Australian small businesses do not have a process in place for chasing unpaid debt. This is incredibly concerning as the collection of debts is an essential part of maintaining a healthy cash flow and ultimately ensuring the survival of a business.

It can be a very awkward conversation which many business owners tend to avoid and rightly so. We often ask ourselves: is upsetting a customer over a few thousand worth losing their business altogether?

Not taking prompt action is likely to be detrimental to your business. Here are some ways to handle the unwelcome elephant in the room.

Automate your processes:

The good news is that there are other ways to approach this dilemma, meaning you no longer have to have the awkward conversation directly with a valued client.

By automating collection processes you can greatly reduce the stress and anxiety (for both parties) that is often associated with chasing down payments from customers. This allows your CFO’s, accountants and bookkeepers to spend their valuable time on more important tasks rather than playing an unpleasant game of phone tag.

Automation effectively streamlines the entire process and ensures that no payments fall through the cracks. It lets businesses manage their end to end collection cycles, while providing their customers with simple payment options. It’s a great way to improve your business’s cash flow and avoid the negative impacts that late payments can have on your finances.

Be Compassionate:

The whole idea of debt collection is ‘triggering’ for many people and that’s understandable. In today’s economy with cost of living pressures, high inflation and increasing household debt, many people are experiencing financial stress. So while I’d urge your debt collection processes to be diligent, it’s also important to leave room for compassion. At the end of the day you want to retain that customer and ensure a positive customer experience until the end.

When developing Paycepaid we kept client needs at the forefront of design and what we came to realise was that no two customers were ever facing the same situation. What this means in terms of the collection prices is that a repayment option that suits one client might not suit another. So take it one step further and make comprehensive repayment options available.

Stay consistent:

It’s crucial that your business ensures top service even when it comes to collecting debt. Traditionally, conversation around debt (as fueled by negative emotions) has strayed significantly from a businesses previous customer interactions.

However, it’s important that tone and language remain consistent to ensure professionalism and maintain a positive client experience. When I developed the idea of Paycepaid I knew I wanted to aid businesses in this process. This came through in the way that users can build a customisable strategy using their preferred language. This is everything from the way you speak to your customers and your industry to the messaging that is completely unique to your business. This has proved vital to ensuring a smooth process as it allows businesses to connect with their customers on the same level.

In conclusion, managing relationships with clients is a delicate balancing act that requires skill and attention to detail. In a nutshell, debt collection is an unspoken strain on business/client relationships, but it doesn't have to be. By automating processes, providing comprehensive repayment options, and approaching debt collection with compassion and consistency, businesses can mitigate the risk and ensure healthy cash flow, ultimately leading to the survival and growth of the business.

Bill Mali is the founder and CEO of end-to-end debt collection software solution Paycepaid

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