6 Steps to Successfully Collect Small Business Debt
Debt collection can be a big problem for many businesses, especially small businesses. If you are unable to successfully collect on debts, then it can have a big knock on effect of your business. As with any legal process for the recovery of money that is owed to you there is a right way to proceed and a wrong way. Here are the 6 tips to ensure that you get the money that your business is owed quickly, safely, and most importantly, legally.
1. You have the right paperwork from the very start
If all you have is a handshake agreement then you really don’t have a leg to stand on. If you want to have any hope of getting the money that you are owed, then you need to secure your interests with policies, contracts and other systems. Having these will ensure that you are able to follow through and collect a debt that is owed to you.
The importance of a signed contract cannot be overstated when the payment is going to be provided at a later date. You’re going to need a straightforward payment policy that leave no room for wiggle room when it comes to the timeline for payment. All paperwork should include exact dates and the details on penalties for late payment.
2. Your accounting needs to be in order
Ensuring that you have accurate records of all of your incomings and outgoings is vital so that you can instantly identify the payments that are delinquent and then quickly follow up on them. Sometimes a late payment is not malicious, a client could have simply forgotten about it or misplaced the invoice. You need to be able to be able to provide each of your client with an update of exactly where their account stands. Clear and easy to understand invoices are a very effective means of doing this.
3. Don’t waste time
There is a client management angle to be concerned about here. You don’t want to alienate clients so you may be reluctant to ask for money that is owed. It can be very tempting to allow a little bit of a grace period to. This needs to stop. Without being rude, you can simply have a straightforward and formal series of communication pieces that inform the client that their payment date is coming up, and then that it has passed. This can be crafted in such a way that you are doing them a favour to help them avoid a penalty fee for late payments. However you decide to do it. You need to make sure that you do not let yourself be taken advantage of.
4. Stay on the right side of the law
Always take the high road and as long as your paperwork is in order you will win when it comes to debt collection. You should never let yourself become emotional when dealing with a delinquent account. If there is even a hint of a threat or intimidation then you could expose yourself and your business to some very destructive consequences. If you are unsure about the laws and guidelines, speak with a debt collection lawyer for further clarification.
5. Bring in the lawyers
If you have exhausted all means of attempting to collect the debt amicably then it is time to bring your lawyers in. Having an attorney draft the collection letters that you need is a great first step to getting the ball rolling with the legal process.
6. Document everything
We’ve already covered the importance of keeping track of accounts. This includes letters sent, the number of invoices issued, even phone calls that have take place.