One of the most important rules for a successful business is to swiftly collect money that’s owed to you – it should be coming in faster than you have to pay it out. This means being able to deal effectively with customers who owe you money, because the last thing you want is a protracted debt collection process that could wind up in court. It’s time consuming, expensive and stressful.
Establishing efficient systems means that not only will you get paid faster, but you’ll also reduce the risk of late or non-payers. The more robust your payment and credit systems are, the less your chances of having to chase up debtors. At the end of the day, prevention’s infinitely better than a cure, so keep the following in mind:
You might be tempted to offer the same credit terms to everyone, but it’s better to be more selective when you’re deciding who to accept. In particular, be wary of:
If your business uses invoicing payment options and you do extend credit, you’ll probably have to chase up customers at some point, despite your best efforts.
Before you begin debt collection procedures, make sure the debt’s valid. It’s important to confirm that you’ve supplied the correct products and services, in the right amounts, for an agreed price within a certain time frame. Once you’re sure of that, it’s time to chase up what you’re owed.
If you can put a human face on the debt, reminding your customers that what they owe is affecting you personally, they’ll probably pay up faster. Try:
If you can, try to be flexible when it comes to repayments. You could agree to accept goods for their resale value, or accept a service instead of cash.
If you’re still not getting anywhere, it might be time to call in the professionals. However it’s a big step because when you get a debt collection agency on the case, you’re probably going to alienate that customer. If they’re a habitual non-payer, you might not see this as any great loss, but it’s still important to think carefully about what the impact will be on your relationship with your customer.
This really is a last resort and should only be used when absolutely everything else has failed and the debt you’re owed justifies the cost of a legal intervention. Going to court because of a sense of outrage or a desire for revenge is never a good idea – your decision should be based on business principles and you should be confident that the facts stack up on your side. Speak to your lawyer about the process, cost and potential outcome and make your decision based on their advice.
As with anything else in business, handling debt and making sure you get paid on time is about having good systems and processes in place. The better your systems, the more likely you are to get paid on time, and the less likely you are to offer credit to customers who could turn out to be a problem.
POSTED IN: 2017,Debt Management,Day to Day Banking