Sales Team Duped by Slow or No Pay Customer; Now What?

Posted by Ryan Howard on Jan 6, 2020 7:23:37 PM

Sales Person Duped by Customer.jpg

In many growing companies, sales teams acknowledge new business with a mini-celebration. Every little bit of encouragement helps when business development seems to be working. After the celebration, the rest of the organization prepares to bring on the new client. Accounting sets them up as a new customer, the product gets shipped or the agreed-upon service is provided. An invoice is subsequently sent to the client and the wait begins. 

What happens when customers pay late or not at all? What then?

Why Do Customers Pay Late Or Not at All?

When a sales team initiates a contract with a customer, they will both agree on payment terms and sign the contract in agreement. The typical terms for payment range from immediate payment to 30, 60, 90 days, or even longer for invoices with large enterprise companies. Late payment may be due to a backlog on the part of accounts receivable or accounts payable. Other reasons for late payment can be misplaced invoices, a dispute over the agreement, financial hardship, or the responsible party may be out of office, ill, or no longer working for the customer. 

Can Sales and Accounts Receivable Work Together?

Beyond sales and getting a signed agreement, accounts receivable is responsible for invoicing and including the agreed contract payment terms for the customer. When a customer fails to pay within the specified amount of time, it again falls to accounts receivable to send payment reminders, late notices, and attempt to contact the customer's accounts payable department. 

Send These Reminder Notices

When payments go too long without payment, the originating sales team can re-engage with the customer to help recover the account.  If there are any outstanding disputes or contract issues, they can be resolved through communication between the initial parties who constructed the agreement.  The relationship has already been established due to an extended sales cycle, a larger number of stakeholders and discussions during the contract terms agreement. Often, the payment challenge is resolved at this step.

Do We Hold Up Our End of the Contract?

During attempts to contact the customer, your business may wonder if you should continue to hold up your end of the bargain. For instance, if you're providing a service or distributing goods, should you continue, even if the customer hasn't paid on time?

It really depends on the contract terms. Your sales team should include collection procedures and collections policy within the signed agreement. Those terms will determine how much longer the non-paying customer can expect their goods or services to last before these things are discontinued altogether. Enterprise Recovery recommends a clear and concise collections policy detailing when service will be suspended or terminated due to non-payment.

If the client refuses to communicate, refuses to pay or continually breaks promises to pay, your contract terms should specify that your business will terminate the service or shipping immediately.


When Do We Hire a Collections Agency?

When a new customer doesn't pay their initial invoice after a certain amount of time, it may appear that a business does not have much recourse when it comes to collecting. In fact, with a signed agreement and if your business fulfilled its part of the agreement, hiring a collections agency may be necessary to recover payment.  A dedicated third-party commercial collections agency can help identify the root cause of the late payment, establish urgency, help set precedence for future payments and in some cases, re-establish the relationship between the two companies.  Earlier stage collections can be handled under your company name and branding to help remove the responsibility from accounts receivable but still recover the account.

Business-to-business collections are not always about large volumes of past due accounts. Many times, there are a few high-dollar invoices that are contributing to a loss of income for the business. Even if it appears that your company sales team was duped by a slow or no-paying customer, your accounts can still be recovered and you have a right to make sure they are. 

Hiring a collections agency? See how Enterprise Recovery brings your accounts back into orbit.



Topics: Best Practices