For businesses that extend credit to their customers, late payment or complete failure to pay is a reality. While there are many reasons why debtors do not pay, no business should willingly accept that these accounts should be written off without proactively implementing strategies to try to recoup funds.
Of course, debt recovery services can be of tremendous support in helping a business receive the money it is owed, but before such a service is accessed, businesses should utilise the following approaches:
1: Develop clear contracts
Before you enter into an arrangement in which you offer credit, it is vital that your terms of payment and a contract for the work being done is put in place and clear. It is important to note that a contract can exist whenever your business agrees to carry out a service or supply goods for payment, regardless of whether the contract is in writing. However, it is often preferable to have documents in writing and officially signed.
What is absolutely imperative is that you discuss the terms and conditions of service and payment with your customer or client.
2: Know who you are contracting with
This may sound simplistic and obvious, but knowing who you are entering into a contract with can be more complex than it initially seems.
As you develop a contract, you need to know and understand whether the business is a sole trader, a partnership or a company. You should then ensure that you record the correct name of the company or the business partners’ names, the ABN of the business and the correct address details for the principal place of business (this should be a street address rather than a PO Box address).
3: Telephone calls and letters
Historically, telephone calls and letters have been the most often used strategies for businesses trying to recover outstanding debts, but phone calls, letters and now emails have proven to have limited effect in achieving this end.
Sometimes, your debtors genuinely forget to pay and a phone call, email message or letter can be all that it takes to spur them into action and for you to receive payment. A telephone call in particular can help to preserve a good relationship that may have been built with your customer or client.
It is also the case that some other businesses actively avoid payment of their bills and communication in the form of a telephone call, email or letter provides no impetus for them to fix up their debts. In this situation, a stronger course of action is usually required.
4: Debt collection agencies
When a business has exhausted all approaches that are available to them and within their own resources, accessing the services of a debt collection agency offers the absolute best chance of debt recovery possible. It is also worth noting that a business does not have to try to recoup their debt through a variety of approaches before engaging a debt collection agency as so many businesses do not have the internal resources required to do this well or at all.
Debt collection agencies offer experience, skill and access to information not otherwise available to business owners generally. They provide a specialist service that operates within the parameters of the law to take action to have the monies owed paid to you.
In working to recover your outstanding funds, debt collection professionals employ relationship management skills so as not to destroy business relationships that may continue to be significant for your business. Rather, it is common for debt recovery services to be firm but fair in approach and communicate with debtors in a respectful manner.
No business likes to face and deal with the reality of bad debts. However, no business should be expected to absorb the financial losses that occur when a service or product is provided but payment is not received. Fortunately, there are actions that can be employed and strategies that can be used in order to have the best possible chance of receiving payment from your debtors.