Do you have stubborn customers that refuse to pay their debt after buying goods from you on debit?, we all know how important is our customers and also, and our business money is also important, so can’t afford to lose any of them, here in this post, I am going to share with you 12 Effective Ways to Convince a Customer to Pay their Debt.
How To Convince Customers to Pay their Debt
There are many strategies that companies use to collect past-due accounts. Some of the techniques that companies employ, such as phone calls and letters, can be effective but can also be costly and time-consuming. Other methods such as lawsuits and wage garnishment can be more effective but can also have negative impacts on customers who may already be struggling financially.
Debt is a major problem for many people. And if they don’t pay, it can result in bigger problems such as repossession and bankruptcy. It’s important to make sure you’re able to get the money owed to you before it becomes an even bigger issue. Thankfully, there are some ways that can help convince your customers to pay their debt–no matter what.
Here is a list of ten tactics for collecting on past-due accounts:
1. Put them on a payment plan that works for them and their situation
2. Establish trust with them by being compassionate and understanding
3. Let them know how much progress they’ve made so far
4. Provide incentives for paying off their debts sooner than later 5 Offer a discount or cashback as an incentive for good behavior
5. Offer hope: Give your customer a sense of hope by showing them the steps they need to take in order to become current and avoid legal action.
7. Be transparent: Let your customer know what’s going on with their account at all times, from initial contact with you up until their account is
12 Effective Ways to Convince a Customer to Pay their Debt
If you are having difficulties collecting on an unpaid debt, this blog post is for you.
You’ve done your best to collect on the account receivable, but it just isn’t happening. You don’t want to give up, so how do you convince them?
This blog post will teach you ten ways that have worked for other businesses in similar situations. From sending a debt collector letter to garnishing wages, these are proven methods for getting customers to pay their debt on time.
1. Send a debt collector letter
Although a polite letter isn’t as threatening as threatening debt collectors can sound, it still gets the job done. A letter simply outlining the debt with no threats of foreclosure or imprisonment can help to soften the blow.
You can use your letter as a teaching tool to help clients understand why it is important for them to pay up. You could also use the letter to negotiate the repayment of the debt.
Of course, many creditors will be happy for you to send a letter, but you may be better off asking them for another payment schedule or threatening to refer the matter to a debt collector.
Collect more of a debt from one customer
If the debt you’re trying to collect has a partial amount owed to you, then you might be able to collect it from a smaller amount to start with.
2. Garnish wages
A garnishment is an attempt to take wages. An individual or an organization will call the employer to request funds from their paycheck, usually to pay off a delinquent debt. With wages garnished, the money can be directed back to the company to pay down the account and interest on the debt.
The employer might have a financial hardship that makes this request feasible. Alternatively, if there’s not enough money in the business, the business might have a way to get it. A second possibility is that a creditor garnishes wages to get the debtor to pay up.
Use a third party
Most of the garnishing companies will work with you to set up payment plans and make payment arrangements. If you have made good faith efforts to collect on the debt, a garnishment may not be necessary.
3. Call the customer on the phone
I know most people hate to be bothered with calls from customer service, but if you call, you can gain valuable insights and answers to your questions. It may even end up being the most powerful method for collecting on an unpaid debt.
Customer service is often the best resource for a business owner, and you can be sure that the person you speak with has seen many of their customers struggle to pay off debts. They are more likely to be sympathetic to your plight and will be more understanding if you ask them to help you in any way possible.
While you will likely not win every phone call, you may be surprised at how effective phone calls can be.
4. Offer a settlement plan
One of the best ways to convince a customer to pay up is to offer them a settlement plan. If the customer doesn’t accept, you may have to take legal action, but you can save some of your own money in the process.
Sometimes a customer will reject a settlement offer, then will later agree to an alternative that’s better for them. You can pursue a settlement agreement, where the customer pays less than they owe or agrees to settle a few months early for much less.
These kinds of agreements are hard to negotiate with a customer because they are already feeling angry and violated. It’s hard to gain their trust.
However, this is an important step that you should not avoid.
Make a mistake
The situation you’re in is tough.
5. Make them an offer they can’t refuse
It’s important to give customers an incentive to pay you back on time. This method is commonly used in the casino industry. Whenever you reach a certain milestone in your online business, you’ll start offering free play. If customers choose to stay on, they’ll have the opportunity to win some rewards, such as free meals or even a free stay on the casino’s property.
Make it easy to pay them
There’s nothing worse than spending hours trying to collect on an unpaid account, only to find out you can’t. Many online retailers will make it easy to pay their outstanding credit card balances or even offer free credit cards with their “Discover” credit card.
6. Get their attention with a debt recovery letter and follow up with a phone call
How is a debt collector supposed to convince a debtor to pay off their bill? They have to get their attention. The best way to do that is to contact them while they’re paying off the debt in the exact way the customer requested. It all starts with a debt collection letter.
This is where you send your first pitch to them. Keep it short and to the point. Your letter should contain a contact email address or snail mail address where they can be reached at a later date, and make it easy for them to make the first contact.
The letter should also include a summary of your company and the outstanding debt. Most customers prefer a phone call so make that the first and last line of the letter. Mention that the customer requested the first contact.
7. Send them a postcard
If you have a good relationship with the creditor, this is your next best bet. Send a postcard stating the amount of debt owed and the deadline for repayment. It might help to include a business card so the creditor can call you with any questions or to dispute the debt.
Gather all information from the customer
Start the collection process by requesting all the information from the customer and having them sign a receipt that states they are aware of the debt and agreed to pay.
Prepare for a collections conference
If you go to a collection conference, be prepared with all of the necessary documentation. The hearing officer will ask for a credit report, proof of the debt, your last pay stub, a copy of a contract, and anything else you can provide.
8. Reach out to their family and friends for help
This might seem like an odd way to get money from a customer, but it is a surefire way to get them to pay. While it’s hard to pay your way through college, it is much easier to pay back the money that is owed to you.
An effective tactic would be to start a Go Fund Me or Indiegogo account for your customer to use to pay off their debt.
For example, customers who want to pay their student loans but haven’t saved up the $1,000 they are required to pay can set up their account to transfer money from their account to one that has been set up for that purpose.
Send a letter that emphasizes who you are as a business
Since you are a small business, customers will probably see you as one of their customers.
9. Ask for help from their family and friends
People often think they can pay their debt on their own and it’s simply not true. It can take days, even weeks to get the money out of their bank account. So, try asking friends, family, or even co-workers for help. Invite them over for dinner, ask them to chip in for your laundry bill, or ask them to hold a raffle. You may even ask them to pay your account. Most people have good intentions and they would like to help you.
You can even give them a raise or bonus to help them get their hands on the cash. Or offer to reduce the debt you are collecting. Let them know you want them to pay.
You’ll never know for sure how much they can afford to pay, but sometimes you can negotiate a little more. You can even offer a reduced rate on the service or store credit to help make your point.
10. Request payment as a gift
Pro Tip: Make it clear that you are making the gift in the first sentence of the invoice and repeat that message on every invoice.
Customers love to receive gifts, especially when they’ve made a purchase or service that they’re happy with. Consider sending the customer a special gift in recognition of a difficult customer service experience or a discounted rate.
Arrange a reimbursement for lost or stolen items
Pro Tip: If you’re in possession of the item, make sure to get the item back. If you’re not, work with your vendor to exchange a comparable item.
Your vendors should be able to provide you with estimates on lost or stolen merchandise. If your vendor does not have the item or can provide an outdated one, work with the customer to set up a replacement.
Threaten to ruin their credit score
One of the most effective debt collection threats is to tell a customer that their credit score will be ruined. In one case, a company that was owed a large sum of money decided to include a text message on the letter that mentioned how they were very close to destroying the account holder’s credit score.
The recipient received a text message, telling them that their credit score was at the top of the 0% range, and in reality, was below 30%.
The customer was so scared that they finally paid the debt.
Contact a debt collection attorney
As a small business owner, your job is to understand the laws that apply to your particular situation, but there are certain laws you need to pay close attention to.
In many cases, unpaid debt is taken up under the Fair Debt Collection Practices Act.
11. Offer a partial collection of the debt
one of the easiest ways to collect an unpaid debt is to give a partial collection of it. Consider the offer:
We will pay you 10% of the original debt plus $10 per month until you pay the entire amount.
Instead of paying you only $100 per month, you can pay an extra $400 per month and end up with $2,000. This is a great deal for the customer because it is less than their debt is actually worth, and it’s easier to collect on because the debt was so small.
Create a debt repayment plan
Make sure you put any unsavory details in a confidentiality agreement.
There are many options for a debt repayment plan, including payment plans (these are usually for smaller debts), and paying your debts on time. Make sure you make the plan easy to follow so that you can make up for the debt.
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