No matter how hard you try to always weed out potential delinquent and non-paying customers, sooner or later there will be accounts that will get past their due. The golden rule of keeping your company in business is to get the money owed to you faster than you have to pay those you owed from others. The inability and unwillingness to pay debt can easily cause financial crisis in your company, thus, the worst thing you can do with them is ignoring them. So how to you collect debt effectively?
Many businesses delay or even avoid debt collection for two reasons. One is that they find the process tedious and chasing debtors is unpleasant. Second is that, they are so involved in their daily business operation and that collecting debt is either set aside and hope for the debtor to pay someday or totally neglect it. Income and cash flow are what makes businesses run. Overlooking debts can cause domino effect and will result to long-term damage to the company. Thus, the best way to avoid this is to establish an efficient system and procedure. No matter how hard you try, there will be occasions where you have to chase debtors. So, here are the tested-and-proven guidelines to help you with it.
Know the Age of Debt
The possibility of collecting debt in full directly relates to the age of the debt. The longer the debt goes unpaid, the less chances you have to recover it. Thus, the best strategy is to recover the debt as early as they get past their due.
Avoid Large Debts
It’s always almost impossible to avoid debts when running a business, whether you’re selling products or providing services. Thus, to protect yourself from debts, you need to avoid them before they happen. As an entrepreneur, you should identify problems way before they arise. When it comes to unsettled bills, it’s better to cut-off further credit until current bills are settled.
If your company don’t have any effective system or guidelines in monitoring late payments or unpaid invoices, then it is always possible for customers to still enjoy your services or order more products from you. Keeping debts small and manageable is not only beneficial for you. It will also give your debtors the best chance to settle their debts.
Collecting Your Money
There are three common ways to collect debt; personal visits, phone calls, and sending letters and reminders.
Utilizing a Lawyer
Sometimes using the assistance of a third-party company can be beneficial to both sides of the argument. Effective debt collection agencies such as tclginc.com employ experienced lawyers to help you recover lost funds quickly and effectively.
Personal visits can be costly (it takes you away from your core business), but is also often the most effective way. However, this process is only practical if the debtors live relatively close.
If the debtor is another business, then visiting their company will give you a good chance to know more insights about their business. Chatting to their receptionist for example, will give ideas about the company’s condition. Does the company look well-managed? Do they look busy? If the owner avoiding you? Are they trustworthy?
Of course, make sure you’re well-prepared when paying a visit. If the debtor is actually a good customer, then your priority is to update the account and make things work out.
Though phone calls are not as effective as personal visits, they can be a nice reminder for debtors who are not delinquent in their accounts.
Sending Out Letters
Sending letter is the most common and easy form of debt collection. However, since it is less impersonal, it is also the least effective. However, this tactic works to clients who intend to pay their bills anyway. But ineffective with habitually late payers.
If all these things fail, then it is time to hire the services of a commercial debt collection agency and let them do the dirty job for you.