Do you have an elevator pitch for your business? It’s defined as a succinct description of your unique selling proposition (USP), ideally in 30 seconds or less. It can be helpful for networking events, or for turning casual run-ins into business leads. It can also be beneficial to your debt collection policy because the way your business is set up has a direct influence on how your payments are structured, and what you can do to recover them.
For example, a clothing retail chain shouldn’t have an issue getting paid, because customers pay before they can take anything home. However, they may have problems with shoplifting, or with customers who buy items, wear them once, then return them and demand refunds. On the other hand, the retail store’s suppliers may stock the shop and not get paid until the clothes are off the shelves so that the return-and-refund matter can be a real problem for their bottom line. Here are some questions you should ask yourself to see where you stand.
It goes back to that elevator pitch. When you meet someone new in your business capacity, who do you tell them you are? Are you a firm that supplies books to school kids, a garage that services truck fleets, a medical practice that serves military veterans? Do you primarily serve individual customers (B2C) or are you ‘support staff’ for another business (B2B)? Concerning this, what’s your primary payment model? Is it cash on delivery, payment in advance, clearance in 90 days, or ‘you get paid when I get paid?’ These are essential considerations not just for you but also for you chosen debt collection agency.
What sector(s) does your business belong to? A grocery store can be categorised as FMCG, stationery, food and beverage, fast food, kids’ supplies, and much more. Their customers pay immediately, but their suppliers probably have to wait a few months. A lawyer is more likely to have contingency agreements, meaning their clients only pay if they win their cases, so debt collection looks completely different in their eyes and their debt collectors need a different approach. Contractors or architects use a tiered payment plan. Customers pay enough to buy raw materials but might not get their balance until construction is complete.
Assess your business size
You might think this is based on whether or not you need to outsource debt collection, but that’s not necessarily the case. If you’re self-employed or you run a sole proprietorship, you may decide you can’t afford to hire a debt collector. However, you’re the only one involved in the day-to-day running of your business, so any time you waste chasing cheques is time taken away from finding new customers and developing commercial products.
It may actually cost you more not to hire a debt collector. At the other extreme, a massive company with hundreds of customers might have millions in outstanding debt, and once that kind of volume is involved, then recovery discussions are more likely to be mediated by debt collection lawyers and may include injunctions and property seizure from the outset.