Get those debts paid a little more quickly

As a small business there are several things that can make the debt collection process a little easier and perhaps get the debt paid a little quicker. Here are some practical examples.

Small business, will, on occasion have to deal with a customer unable or unwilling to pay their debt. It is important for to reduce the number of customers which have outstanding debt in order to improve cash flow. While there are a number of paths to take in order to recover the debt, there are several things that can make the process a little easier and perhaps get the debt paid a little more quickly.

Make a collection plan

Set out a routine collection plan and use the same plan for all customers. The key is to invoice on time and set a time frame in which to follow up if you haven't received payment. You may like to start with a phone call and follow up with letters at regular intervals. Give your customer an opportunity to pay before you make contact again (just make sure, when you do call, you are familiar with the account and have the details in front of you should they have any questions or disputes). Do not address your letters to 'the company' or a generic department - seek out an individual and try to correspond with this person for all contact, this will offer consistency and hopefully remove the chance of any misunderstandings or miscommunication.

Be diplomatic

Don't be aggressive when trying to collect the debt - be nice but firm. This does not mean be a push-over, you are still trying to run a business! As humans, we are more likely to respond to a polite and diplomatic request than a hostile demand. Your customers will be less inclined to pay if you are aggressive right off the bat; however it may be beneficial to become firmer as correspondence continues without payment. Be sure to give a reasonable opportunity to pay before you start getting heavy handed. There is no point frightening your customer into paying as the customer will never want to deal with you again - you may have received payment this time but you will have lost a customer.

Don't make empty threats

Don't make threats if you have no intention of following through. If you don't plan to forward the debt to a collection agency or take legal action, don't tell your customer you will because they may well call your bluff and leave you with little choice. You should be calling the shots in regards to how far you will go to collect the payment and making empty threats shows the customer you are floundering and getting desperate. However, if you plan on following through, don't be afraid to tell your customer you plan to engage a debt collection agency or take legal action but avoid telling them what will happen if they don't pay.

Be flexible

It some cases, you have to expect that the customer hasn't paid their debt because they are unable to, so you need to be prepared to be reasonable and flexible. Demand the full amount straight up but if your customer offers a goodwill payment or to pay off the debt in instalments, you would be shooting yourself in the foot to refuse. Accept any offer by your customer on the condition the debt will be cleared within a reasonable time frame. You need to make it easy for your debtor to pay you in order to keep the customer once the debt it paid.

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Know when to get help

You have to be able to recognise when the debt is no longer within your control and be prepared to forward it to a debt collection agency. If your customer is unreasonably withholding payment, or simply ignoring your requests, you may be wasting time and money chasing it yourself and a debt collection agency may be able to help save you both. As a small business, you need to set yourself limits as to when to pass the debt onto a collection agency - for you this may be when the cost of the debt exceeds a particular amount or the length of time it has been outstanding.
Dun & Bradstreet can assist your business with its collections needs - contact Client Services on 13 23 33.

Check references 

A sure fire way to avoid having outstanding debt is to check your customer's credit report or get references before extending credit - it could save you a lot of time and money in the long run. Before extending credit you can request a reference from a previous supplier of the business to ensure you are not getting involved with an unreliable customer, however you have to expect that they will provide a positive reference. Alternatively, for a small fee, you can order a credit report on the customer and save yourself a lot of time and energy chasing unpaid debts.
Order a credit report through Dun & Bradstreet >>

While these tips can provide a good basis to recover you debt, sometimes you may just need to refuse to do business with your customer until the invoices are cleared. After all, your business is your livelihood.

Find out more on ways to collect debt >>

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