As a business owner, you should be prepared to deal with clients who have outstanding debts. In the present scenario, a large number of business owners are experiencing cash flow problems and according to statistics, if the debt is overdue by a year, then the chances of it being paid is only 24% whereas, if the debt is overdue by only a month, then the chances of it getting paid increases by 93.8%.
Businesses require a sufficient debt collection recovery process for collecting debts quickly and effectively and improving cash flow management.
In this post, we will provide five useful tips to get your money quickly and professionally.
1 Make sure that your terms are agreed upon
You need to place an early emphasis in the relationship with your clients and have your contract signed by all of them. This will help you create a legally binding agreement that will set responsibilities and clear expectations for all involved from the beginning. You need to outline your terms because if you don’t, you will be left at the mercy of your clients’ payment process, which can be instant or overdue. Not specifying your terms could affect your ability to maintain strong cash flow, and it could make it challenging to recover money owed. Should the matter escalate, you can always take legal actions against the customer organisation or employ a professional debt collector.
2 Call the customer regularly
Instead of just sending written debt collection notices, you can call the client regularly as a reminder. This is significantly more effective than any other communication medium as you are making direct communication with the client, and you can follow up on what they say regarding the matter. For example, if the client says they haven’t received an invoice from your company, email them a copy of your invoice while on call and confirm they have received it there ang then. This will establish that you have done the work from your side, and it is up to the client to how they respond.
In case, if the debt is overdue, ask the client when you can expect the payment and before closing the call, confirm the payment method and payment date. This will favourably uphold a promise from the client, and you will have a verbal proof of when you can expect the payment. Most corporate calls are recorded for numerous reasons, and you should do the same when asking payment. The recordings can help in the future.
3 Maintain the cool
It is easy to allow your frustrations and emotions to get the better of you when the clients don’t pay their bills. But you are advised to keep your emotions in check as it will help you think clearly and work out the best solution for getting your money back on time.
In a situation where the debtor says that they are facing some level of financial hardship, instead of taking any action, you could come up with a payment plan option that allows the debtor to pay your money under less pressure.
4 Letter of Demand
If your phone calls haven’t been positive and your payments are still outstanding, consider sending out a Letter of Demand to the client. The Demand Letter must state your request to receive payments for the products or services you have rendered, giving details of the specific situation leading to the letter. You need to state what actions you will take if the payment is not received within the given timeframe and set a deadline for payment. If your payment is long overdue, you may consider submitting a legal notice stating that if the payment is not made, the client will be dragged to the court.
5 Employ a debt collection agency
If none of those mentioned above options worked, you could engage a professional debt collection agency. It is your last arrow in the quiver. A professional debt collection agency will collect all the required information on your client before recovering the money owing to you. They abide by ethical and professional standards when dealing with debtors. They can help you recover your money. An organisation such as Boston Commercial Services specialise in the effective collection and repayment of customer debts.
When you are availing your services, ensure that your expectations are set, and your conditions are agreed upon. You may also ask the client to make an advance payment if possible