Payment plans for problem debtors

We've all had the problem customer that has used every trick in the book to avoid paying their account. In nine out of ten cases the best way to deal with problem customers is to negotiate a settlement or a payment plan.

However, doing this in a way that provides the best possible outcome for your business requires three key elements: preparation, careful consideration and common sense.

Follow these tips to successfully negotiate a settlement with your problem customers:

Do your research

In most instances the primary reason a debtor wants to arrange a payment plan is because they are facing some form of financial stress. However, this may not always be the case and accordingly doing your research is paramount. Find out all you can about the debtor's financial condition so you can make a sound judgement about their ability to make repayments.

Don't make the first offer

Don't ever make the first offer. If your customer feels that a payment plan is in order, let him make a reasonable offer which you can consider on its merits.

On the flip side, if you believe a payment plan is the only way to get the funds you are owed from your customer, put the idea to the client but let them suggest an appropriate amount to be paid at regular intervals. This will ensure that you don't start off too low and will assist you to get the funds owed more quickly.

Be willing to negotiate

Many creditors take the position that they want the full amount they are owed and they want it now however, this approach is only going to leave you disappointed with the outcome. Every debt must be looked at on its own merits as the financial problems of the debtor are extremely important in settling any debt. It is far better to retain small cash payments regularly than it is to be faced with a bankruptcy could result in little or no payment at all. 

Be realistic

Remember that payment plans or settlements make both parties partially unhappy. As the creditor you will either get less money than you are owed or you will get all of it drawn out over an extended period of time. This is better than getting nothing but its still not an ideal situation - you need to prepare yourself for this outcome.

Don't forget the customer will have other creditors : If you are dealing with a debtor who is facing financial difficulties it is reasonable to assume that they have other creditors that haven't been paid. This fact reiterates the need for you to exercise common sense. If you focus on information and investigation it's likely you will walk away at least partially satisfied. If you don't take this approach you are more likely to end up starved of cash.

If you provide a product or service to a customer you deserve to be paid in full and on time however, the reality is that at some point it is likely that you will face the hassle of customers that pay late or don't want to pay at all. When these situations arise you need to tread carefully to ensure you achieve the best possible outcome for your business.

Remember, when it comes down to it some money is better than none, as is full payment over an extended period of time.

 

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