Any business that makes a lot of sales on credit knows that customers that timely collection of debts is essential to maintaining a positive cash flow. People not paying their debts means that while you may have recorded a profit, you won’t have received any cash to pay for:
Small and medium-sized business owners can feel awkward when it comes to debt collection. Not all business owners have the time for lengthy email chains or phone calls. Furthermore, you might be intimidated by the prospect of having to chase up customers.
Eager to avoid what’s arguably the most stressful part of your business finances? Here are some of the ways to sort out your debt collection before it becomes a massive nightmare.
1) Follow-up invoices before they’re due
It may sound obvious, but you’d be surprised how many business owners leave this to the night before it’s due!
Following up on invoices long before the due date can help remind clients and contacts alike of their payment deadlines. Additionally, since you’re sending out reminders early, you might also prompt earlier repayments from some of your customers.
Finally, since you’re getting in early, you can avoid much of the headache that comes with debt collection. Consider waiting until a lull in business – this way, you can take your time with sending out invoices.
You can even take the opportunity to establish a bit of rapport with the customer – crucial if your relationship is going to be a long one!
2) Keep up-to-date credit files
When you apply for a loan at the bank, the first thing they’ll do is perform a credit check to make sure you’re above-board. During this process, they access your history of payments and make a judgement call about whether or not you can be trusted to pay on time.
You can do the same thing with your customers.
Maintaining credit files can help you track delinquent payers, as well the history of their payment. Be sure to leave notes on whether the payer is punctual or if they have a history of tardiness.
Once you’ve identified and separated bad debtors from the good ones, the task of tracking debts becomes a whole lot easier. Now you don’t need to worry about panicking over good payers, giving you more time to comfortably pursue the less-punctually ones.
And if you notice that one particular buyer is extremely troublesome, you might decide the effort isn’t worth it and cut them loose entirely!
3) Avoid harassing the debtor
Nobody likes returning home to a million different voicemails and an email inbox that’s completely blown up while you weren’t looking!
Even if the payer in question is a chronic late payer, never ever resolve to harassment. For starters, doing this will only break any good business relationship or partnership formed.
Not to mention, if you push too hard you may be taken to court for harassment!
If you need to call or send a message to remind a debtor, do it discreetly. Unless it’s due the very next day, try to space out calls and emails. When following up, carefully schedule messages so you don’t accidentally blow up the recipients phone.
One final tip: be sure to make careful notes of any responses and write down dates for follow-up. This will help prevent follow-up messages from falling through the cracks.
4) Offer a different payment terms
Not all late debts are the result of malice. In many cases, it could simply be the result of a slow month at your payer’s side of things.
If a debtor finds it difficult to pay you on a specific term and deadline, try to adjust by offering a different payment term or plan. Consider offering:
- The option to pay in instalments rather than a lump sum
- Extensions on payment dates
- Flexible payment options
- The option to attach outstanding debts to a future invoice
After all, the goal is to get your money back – the nitty-gritty details are (arguably) secondary.
Doing this can lessen the burden of the debtor and strengthen your relationship with each other..
5) If all else fail, hire a debt collection services
So you don’t have the stomach for debt collection. We understand – it can be a daunting process. Not to mention, it can be timely too depending on the amount of follow-up you have to perform.
The solution? Let a debt collections services help you with your dilemma.
We know debt collectors have a somewhat negative image. If you’re struggling with invoices and collecting payments however, their assistance can be invaluable:
- Processing invoices
- Chasing up payers
- Planning your debt collection
- Recording transactions
While individually these tasks might not sound like much, together they can eat up a considerable amount of your time. By handing them off to a professional, all of a sudden you have time to focus on the other parts of your business that matter, such as making new sales.
Do you find it hard to collect debts for your small business?
Let a bookkeeper in Melbourne take care of it for you – call Maximum Business Solutions today!
In addition to all the tasks normally associated with bookkeeping, the team at Maximum Business Solutions also provide hassle-free debt collection to small and medium businesses that need it.
We help you create an effective debt collection strategy that minimises bad debt expense without jeopardising your relationships.
Additionally, a bookkeeper can optimise your debt collection processes, evaluating potential bottlenecks and streamlining the process. For example, we may decide that online bookkeeping is perfect for your debt collection needs.
Suggestions such as this ensure that no invoices slip through the cracks.
These are just some of the ways a bookkeeper in Melbourne can help you maintain a positive cash flow. Find out how Maximum Business Solutions can help you by calling (03) 9589 0128 to arrange a meet-up.