How to win friends and influence people: debtors edition
Are overdue invoices a major source of concern for you? Do you spend too much time calling, emailing, and reminding customers to pay? A healthy cash flow is of utmost importance for the continuity of your business. But how can you influence the payment behaviour of your debtors without jeopardising the relationship?
In this wiki we have taken a look at the world-famous book How to win friends and influence people by Dale Carnegie and how its advice can be leveraged by finance teams to achieve amazing results with their credit management and debtor management software.
Fundamental Techniques in Handling Debtors
Carnegie starts his book with three fundamental techniques in handling people. The first one is do not criticise, condemn or complain.
Criticism is futile because it puts a person on the defensive and usually makes him strive to justify himself. Criticism is dangerous, because it wounds a person’s precious pride, hurts his sense of importance, and arouses resentment.
…. Any fool can criticise, condemn and complain—and most fools do. But it takes character and self-control to be understanding and forgiving.”
It is human nature to react in this way when you have to wait a long time for a payment, and by criticising, condemning, and complaining to your debtor you are going to make him or her feel the same way.
Sure, your debtor has to pay you within the payment term. But if a debtor is 7 days overdue on payment, do not call or email him to tell “it is unacceptable…”. Instead, find out why a debtor has not paid the outstanding invoice.
Has the product or service not been delivered? Is the debtor unable to pay the invoice? Or is there an error on the invoice?
Try to keep the communication with your debtor going and to empathise with him or her. Then, look for an adequate solution for your debtor and your organisation. This ensures better payment behaviour and customer satisfaction.
Six ways to make debtors like you
“You can make more friends in two months by being interested in them, than in two years by making them interested in you.”
Dale Carnegie builds off his initial core techniques towards the goal of making friends and being more likable. 1) Become genuinely interested in other people; 2) smile, 3) remember that a person’s name is to that person the sweetest and most important sound in any language; 4) be a good listener; 5) encourage others to talk about themselves, talk in terms of the other person’s interests; 6) make the other person feel important – and do it sincerely.
I propose for our purposes it is important to find out: what your debtors need to be able to make the payments, who exactly you need to speak to settle the invoice in question, and when they make their payment runs. By communicating and asking questions about how they operate, you can adjust your processes accordingly. You can easily manage this in debtor management software.
You decide when and how to remind your debtors of outstanding invoices and the rest of the process will be automated. By structurally reminding your debtors in a way that suits them, you can influence their payment behaviour.
Twelve ways to win debtors to your way of thinking
The first principle to win people to your way of thinking: the only way to get the best of an argument is to avoid it. This may be hard to follow when a debtor is 14 days overdue on payment. But it is important not to approach a debtor with anger or frustration, because all the pressuring and quoting-the-law is not going to get you anywhere.
By doing this, there will be no change in payment behaviour.
You just set yourself up to face the same battle next time. So, avoid the argument. Instead, approach the debtor in a friendly manner. They will be more receptive to your point of view and this will make the process quicker and easier the next time.
Secondly, let the other person do a great deal of the talking. Letting them tell you their position is much more effective than you telling them what it is. Get them to talk by saying something like: “We are eager to continue doing business with you, but I am noticing that we are not yet on the same page when it comes to paying invoices on time. How can we work together to fix this?
This puts them in the position of being forced to justify the unjustifiable - you’ve done your work right, you’ve been friendly and understanding, and they still have not paid you on time.
There is no justification and they know that. Let them do the talking…
While this process is very effective, it is also important to try seeing things from their point of view and be sympathetic with the other person’s ideas and desires.
There could be many reasons why your debtor is not paying your invoice. Step in their shoes and figure out what that reason is and sincerely try to help them where you can.
Offering him or her a payment arrangement can already provide relief. This requires no effort. All you have to do is make agreements with your debtor and the rest is automated.
Believe me, this is appreciated.
To be continued …
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