Small businesses need a healthy cash flow, but this can be difficult if the business is owed money that’s hard to recover. These five tips are designed to make it easier to recover debts.
1. Minimise headaches
Why not outsource your credit control to Sollertia? We can chase up late payments for you, freeing up your time and easing your stress levels?
As a firm, we have years of experience and can handle all of your business finances, including debt recovery.
2. Use preventative measures
Prevention minimises overdue payments. If you allow customers to pay after services or goods have been delivered, make sure every new customer is credit checked. Set strict credit limits for new customers and make sure that they agree to sign your terms and conditions.
Some businesses incentivise paying on time by offering discounts.
3. Create a set procedure
Your business needs set procedures to recover money. This starts with sending out an invoice as soon as a service or goods have been delivered. A few days before payment is due, send a statement that acts as a reminder that payment is needed.
If payment is not received by the due date, send out a reminder letter. If this fails, then a telephone call can be made to the person in charge of paying invoices. Find out if they have any queries about paying, or if they are struggling to pay. If they are short of funds, an instalment plan may be appropriate.
Communication should be polite and firm. Harassing a customer or being angry is likely to be counterproductive.
4. Use a debt collection agency
You can hire a debt collection agency to do the debt recovery precedence for you. Professional debt recovery agencies will chase late payments in a professional manner.
5. Legal action
This is a last resort, and starts with a formal letter advising your clients that you intend to take legal action. If payment is still not been made, there are a number of legal options available including the small claims court. For large debts, you can ask a court to declare an individual debtor bankrupt or they can wind up a company. Provided the debtor has enough funds to pay the bill, the threat of this court action should be enough for them to pay up.
Most businesses will have overdue unpaid invoices, but a good outsourced accounting service will advise you on how to deal with late payments.