Posted on: 20 November 2017
Proper management of debts is essential for your business if you provide credit to your customers. If you do not have a framework to deal with these problems, you will end up losing money due to bad debts. Also, your cash flow will be compromised if the money owed is not paid on time. Ideally, you should hire a debt recovery agency to help you with collections. However, you can also take some in-house measures to prevent the issues related to due credit. Here are some basic but practical guidelines to help you get started.
Impose a Penalty on Late Payments
When you provide credit to your clients, you should make it clear that there is a financial penalty imposed on late payments. This provision can help you minimise the number of overdue invoices in your business, because the other parties do not wish to lose their money. Typically, companies and individuals fail to pay their debts in time because they want to keep the money for longer for other uses. This is a common practice for improving cash flow. However, if there is a late fee on the invoices, they will take action quickly to prevent unnecessary losses.
Always Take Immediate Action
If your money is not paid on time, you should not make assumptions about the status of the creditor. Instead, you should take immediate action. In simple terms, you should start your debt collection efforts as soon as the date on which the payment is due arrives. If you are not prompt in your actions, the debtor might assume that you do not have stringent rules on late repayments. Therefore, they will become complacent when handling your accounts. By getting on the case quickly, you will increase the chances of successful collection and prevent future problems.
Listen, but Be Firm
Finally, when you contact your debtor, you should listen to the customer. Poor manners when collecting your debt can compromise future dealings with the client. Ideally, you should remind the customer of their credit and ask for the payment. Then, you should provide an opportunity for the other party to explain. When you understand the reason their repayment is late, you can come up with your solution. However, you should be firm about receiving the owed money. You should not allow them to get away with the debt because of their reason.
Debt recovery can be a time-consuming and challenging process for your company. Therefore, you should consider using a professional debt collection service for better and quicker results.Share