It takes great skill to collect debt efficiently.
To protect your business and the customer, you must navigate a number of legal minefields.
This is one of the many reasons choosing to seek the assistance of a debt collection company like us is worth it.
If you’re not ready to work with a debt collector, then your business should develop a debt recovery procedure, and we’ve got some tips to help you do just that.
So, keep reading to find out how you can make debt recovery easier for your small business.
Make wise decisions on your debtors
Whether your business creates products or provides services that will involve an ongoing relationship with a customer or not, it’s important to choose your customers wisely.
A small business can be reliant on the income that is generated from even just one customer, so when they don’t hold up their end of the deal – such as paying you – then it can cause major issues for the business.
One way you could combat this is by running credit checks on potential clients. Running a credit check before getting into a long-term relationship with a client or one that will have a significant impact in your business will help you save yourself from the stress of having amounts receivable from clients.
Have your client complete the following:
- Credit Application Form (For existing monthly accounts)
- Quotation Form or
- Work Authorisation Form
Make sure that the forms will cover all the significant questions and details of the client.
Another option is if they are a company, you could think about getting a director’s guarantee and considering the risk if they are a young company that hasn’t been around for very long. Making wise decisions upfront reduces the need for debt collection dramatically, thus improving your chances of getting paid on the first try.
Don’t settle or make deals with just hand shakes
Always keep in mind that having Terms of Trade paperwork is a legitimate, recognised standard business practice.
Strong Terms of Trade up front will give the added benefit of making you appear professional to your consumers and enabling you to establish an ongoing connection that is fair and reasonable.
These terms should include payment information and expectations, as well as consequences for breaching the contract terms.
Providing all of this information upfront also means that they can’t make the excuse of not knowing.
Give reminders
You may utilise the following Debt Collecting procedure to ensure that you didn’t fail to remind your client about their debts.
- Send a friendly Reminder – Call or email the client as soon as the payment is past due. Remind them that they still have a pending payment to accomplish. Record the discussion or email and ask them when they plan to pay you. Try contacting someone else at the company if they don’t return your calls or email. Tell them who you are attempting to reach. This frequently results in a response, either from the person you were attempting to reach or another employee of the company.
- Go Directly to the Debtor – Consider visiting the person yourself if they are still missing in action. This can frequently result in a development of personal connection with the customer that may be beneficial for further payments.
- Send Out a Formal Letter of Demand – If you’ve tried everything to get in touch with them and nothing has worked, think about issuing a letter of demand. Due to the potential for interpersonal damage, you should only use this as a last resort.
Always remember to stay calm, polite, and professional when talking to clients. The more polite you are towards them, the more likely they’ll pay their debts.
Give penalties for late payments
You may take into consideration putting late fees in your Terms as a penalty when it comes to swiftly collecting debt.
Whereas a fee could seem overbearing, we must understand that the true cost of not being paid increases with each day that goes by.
In addition to helping to counterbalance the expense of not being paid, this creates a standard for quick payment moving ahead.
Assign debt collection to one member in the team
Assigning one member of your team to debt collection may have various of advantages such as:
- It allows your business to work with each and every client in the same manner.
- It removes the responsibility of debt collecting to those who are unfamiliar and unskilled in debt collection.
- Furthermore, it helps the specific member of the team in improving their skills in communication and negotiation.
Having a dedicated team member working in this area will also help you understand the actual work involved in managing your accounts and can help you create a team around this too. Figuring out how many people you need in order to run your business efficiently is challenging for any small business.
Utilise various communication channels to reach clients
In a small business, good communication can be a significant tool for debt recovery.
This entails communicating with your client in their language and through their preferred channels is significant.
Remembering that your customers are different people who may respond to your debt collection message more effectively in a different way can be quite helpful. You may, however, favour one style of communication.
Emails, texts, messengers, and traditional phone calls and letters – each of these channels has their own benefits, so make sure you utilise all channels to your advantage.
Contact a professional debt collection agency
Partnering with our team of experts is advantageous if you want to give yourself the greatest chance of success.
At JMA Credit Control, we offer complete debt management services rather than just debt collection. We can assist you with seeing the big picture and making sure that everything goes according to plan, whether you need to fill in any gaps in your Terms of Trade, credit check your clients, or load your Security Interests on the PPSR.
So, whether you’re trying to recover a debt or you need help managing your debt recovery process for your small or medium sized business, get in touch with our team at JMA Credit Control. We help small and medium sized business all over Australia, so no matter where you are, we can help you.