Aussie businesses, particularly SMEs, are increasingly failing due to unpaid invoices and debt. Therefore, having a professional, decisive, and prompt debt recovery system is necessary to keep your company financially healthy.
Outstanding invoices, slow-paying clients, and other business debts can have significant adverse effects on your company, like bankruptcy and liquidation. However, when you understand and implement a sound debt collection process, then you can easily navigate this issue and recover outstanding debt.
Below are some practical tips to enhance your debt collection efforts.
Set Clear Payment Terms
You must emphasize early on about your expectations and have all parties sign a contract. Having this contract in place outlines what you expect each party to do to conduct business together successfully.
By having the contract in place, it means you have a legally enforceable document if you require hiring a debt collector in the future. The agreement will also be helpful if you wish to take legal action against your debtor should the issue escalate.
Failure to have such a contract read will mean that you’ll be likely stuck with your client’s discretion as to when they will settle the debt. Such an agreement will rarely be in the best interest of your company.
Also, once the transaction is underway, use these tips to identify arising payment issues swiftly:
- Have clear records
- Stick to the terms and expectations in the contract
- Communicate regularly with the client
- Always record your discussions and conversations
Have A Single Debt Collection Point
The time-consuming aspect of your debt collection process could be likely because of jumping across different systems looking for information related to pending invoices. Many businesses spend too much effort and time gathering this financial information from across various sources.
Ideally, it should be streamlined and easily accessible by the whole team from one integrated system.
With a centrally located and easily accessible accounts receivable system, businesses can more efficiently manage their debt recovery processes. Automated recovery processes allow you to pursue more debtors as their data is readily available.
Categorize the Debts
Are you collecting b2c or b2b debt? Do you have a priority of who you’ll pursue first? These questions should help you quickly classify your liability and help your team know where to start for more efficient debt collection.
Ideally, you’ll want to prioritize your collection efforts by starting with massive debtors and working your way down the list. Once the largest debtor has been contacted, by phone calls or a demand letter, you can then move to other accounts.
Be Firm and Flexible
As a small business, it can be frustrating when clients or other companies are failing to honor their payment times. However, you should always be reasonable when attempting to collect any debt.
Find out why the payments are yet to be made and then use that data to create custom repayment solutions that fit both of you. For instance, if your debtor is unable to pay off what they owe instantly, there’s no reason to try and force for a single lump-sum payment.
You don’t want to frustrate your debtor. Instead, the aim here is to get the overdue payment. It may, therefore, be helpful to set up a balanced payment plan to get money flowing to your company without placing your debtor in financial trouble.
Use these additional tips to be firm when demanding business debts.
- Set specific payment deadlines and call the debtor immediately if they miss any deadline
- Use a professional and calm tone when communicating with debtors
- Avoid making threats or false claims
Consider Hiring a Debt Collection Agency
If you cannot recover your debt after informal negotiations along with a formal letter of demand, then you can engage the services of a debt collection agency Sydney. This agency is an organization that attempts to collect debts for you at a certain fee.
Here’s why a small business may consider getting debt collection services:
- Fine-tuned recovery processes. These professional agencies will usually have a more streamlined and efficient debt collection process that guarantees faster and successful outcomes.
- Ability to trace runaway debtors. An experienced debt collector will use various tracing services to conduct investigations and effectively track runaway debtors.
- The capacity of leveraging the law. The agency knows your rights and the legalities related to debt collection. They can help you avoid expensive legal action by leveraging their understanding of ACCC debt recovery guidelines.
- Focus on facts instead of emotion. A professional debt collector is impersonal and always maintains a friendly, calm manner when communicating with your suppliers, peers, and debtors. They ensure the recovery process is entirely fact-based and aren’t likely to condone unproven excuses and explanations for missed deadlines.
Sometimes, involving a debt collection agency is enough to show your debtors that you’re committed to recovering your payments. Having that professional support such as Boston Commercial Services can help your business to recovery their unpaid invoices.