In business, debt is a fact of life. Few organisations exist on an instantaneous payment system and organisations or individuals frequently expect to be extended credit, in order to do business with you. While this does represent a risk, of course, you can minimise your exposure by putting in place certain strategies and systems. If you're just starting out, what do you need to remember, so that you can protect your assets and investment?
Embracing the Process
Some people think that debt collection is a procedure that they only need to do if things get out of hand. However, it should be considered as an everyday process, rather than the last recourse. Before you even get to that point though, you need to carefully consider who you're going to do business with. You shouldn't automatically take on every client without assessing the level of risk, so you can be as sure as possible that they will give you payment for your products or services. Outline your terms and conditions in contracts and other documentation and never be afraid to verbalise these payment terms when you take on a new customer.
Putting Safety First
Don't be overly keen to make some sales just because you need the cash flow. You may end up in a bigger hole than you might have thought. Likewise, never be afraid to confront somebody who is slow at paying for fear that you may damage your relationship with them.
Costing It in
You should allow for debt collection activities within your budget projections. Sometimes you may come across a customer who simply doesn't pay and this could result in additional bank charges and some debt collection costs. However, don't put off chasing; otherwise, the adverse effects will really do a number on your cash flow.
Most people rely on some form of computer software in order to help them with their expenses and invoicing. Make sure that your system allows you to automatically initiate a recovery process, as soon as a deadline passes. Don't rely on you or an employee to manually trigger this activity, as it could slide for some crucial days.
At the very least, you will need to send out initial emails which must have clear and unambiguous wording and an exact deadline. Don't take half-hearted action, as you may get a half-hearted response. If a deadline comes and goes, then even more activity must be initiated promptly.
Getting Help from the Best
Even with the best systems in place, sometimes you may have difficulties in getting some really stubborn customers to act. In these cases, you need to work with aggressive debt collection agencies who specialise in your area of business.