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One of the most important rules for a successful business is to swiftly collect money that’s owed to you – it should be coming in faster than you must pay it out. This means being able to deal effectively with customers who owe you money, because the last thing you want is a protracted debt collection process that could wind up in court. It’s time consuming, expensive and stressful.
Establishing efficient systems means that not only will you get paid faster, but you’ll also reduce the risk of late or non-payers. The more robust your payment and credit systems are, the less likely you will have to chase debtors. At the end of the day, prevention’s infinitely better than a cure, so keep the following in mind:
You might be tempted to offer credit terms to everyone, but it’s better to be selective when you’re deciding who to accept. To help avoid fraud be wary of:
If your business uses invoicing payment options and you do extend credit, you’ll probably have to follow up with customers at some point, despite your best efforts.
Before you begin debt collection procedures, make sure the debt is valid and the person who owes the debt is truly responsible for paying it. It’s important to confirm that you’ve supplied the correct products and services, in the right amounts, for an agreed price within a certain time frame, and of a certain standard and quality.
If you can put a human face on the debt, reminding your customers that what they owe is affecting you personally, they’ll probably pay you faster. Try:
If you’re still unable to get anywhere on your own, it might be time to call in the professionals. They are, after all, the experts. However, it’s a big step because when you engage with a debt collection agency, you’re probably going to alienate that customer for good. If they’re a habitual non-payer, you might not see this as any great loss, but it’s still important to think carefully about what the impact will be on your relationship with your customers.
This really is a last resort. Speak to your lawyer about the process, cost and potential outcome and make your decision based on their advice.
If you want to avoid a stressful collection process, the key is to have robust systems in place so that you minimize the risk of having to chase debtors. You know the saying that it’s easier to prevent fires than it is to fight them; the same is true of getting paid what you’re owed.
Note: This article is for information purposes only and is not accounting or investment advice or an offer to lend.