Running a successful small business isn’t an easy task, but despite the difficulties that you might face, it is a truly rewarding experience.

Every challenge faced by business owners and operators turns into a learning experience that ends up providing critical knowledge about the things that matter.

One huge area that small businesses struggle with is of course, debt recovery.

A stable cash flow is a necessity for small businesses, able to turn struggling businesses into profitable ones. Having customers pay their invoices on time helps you to achieve this cash flow.

And while this seems like it should all quite easily take place; it unfortunately doesn’t always happen.

In fact, almost every single business in this country will face a delinquent customer of some sort – they may be delinquent by accident, they may be a total bad egg. Regardless of the reason, they can be the biggest thorn in the side of a business of any size, particularly a small one.

Our article explores some of the biggest hurdles that Australian small businesses face when collecting what is due from their customers.

1.     Precision and Communication

Small businesses often try to hasten phases of their business, focusing on the bigger picture, rather than the small details that might not seem super important right now. It’s important to have solid processes and details in place to ensure your business can run smoothly. While you’re not going to get it right from the get-go, the more you take note of processes, the more you can see whether they are working and what you need to change.

One of the most important aspects of your business is communication. Communicating well with your employees will help you be precise with where the business is going and provides an open forum for them to discuss any issues with you.

The importance of communication needs to be extended to your customer base too. It is essential to let the customers know about the policies of your business. By communicating with the stakeholders of your business, it will give everyone clarity about the system.

Tips:

• Take your time to think before deciding. Critical thinking is important for the success of a business.
• Include other employees, listen to what they have to say about the business.
• Find a great and trustworthy leader, the team must have someone to guide them and take track of the growth of the employees and the business itself – you can’t do everything.
• Hire a professional to help with the policies of the business.

2. Proper resources and time management

Small businesses often don’t have the time to manage every single aspect of their business, especially their debts.

Some may think that there is better use of their time rather than following up their debts – for one, it’s not the most exciting task and two, trying to track down delinquent customers and getting them to pay can mean a lot of uncomfortable conversations.

However, the following days, or even hours, after a debt is overdue is important – the sooner the outstanding debts are paid to you, the lesser the immediate strain on your business is. The sooner you get onto these debts, the better chance you have of having a debt paid. The longer you leave it, the less chance you might have, as there are actually time limits on how long you have to recover a debt. Learn about time limits on debt recovery here.

This should also serve as a reminder to check if your business has resources dedicated to debt collection. If not, then it is time to set it up.

Tips:

• Have a well-trained accountant. Make sure someone is looking after and updating the account receivables of your business.
• Plan and execute. Planning is not enough in debt collecting, you must take actions whenever you have free time.
• Remind yourself. Make good use of the resources that you have such as alarms and calendars to check on the process of collection.

3.  Lack of experience in conflict management

Having to converse with people to pay for their debt is hard especially if the business is only starting as most businesses cannot deal with the anxiety there is to it. The fear of having to lose potential clients or customers is really challenging for small businesses.

Most small businesses are new to debt collecting and are inexperienced when it comes to conflict management. It is important that as a business, you develop processes and empower a team to be able to do this as it is an important part of your business. However, it’s also important to know when to stop using your resources on chasing up delinquent customers, and instead, seek professional help. This is where a debt recovery agency (like us) can help you.

Tips:

• Work on the team’s conflict management and confidence. Train your employees how to manage various problems.
• Get ready. Make sure to have a plan on how the conversation will flow and prepare all the details needed such as terms of payment and others.

4. Customer Bankruptcy

Businesses, no matter how stable, can always suddenly fall. This was reinforced with the COVID-19 pandemic changing the business climate. If unluckiness befalls a customer’s business, it becomes a huge problem, especially if they owe you a lot.

No matter what, you must make sure that your business has a good chance when recovering from debt. To do this, it’s important to vet potential clients and customers (this may not always be possible and is somewhat dependent on the kind of business you have). You need to know if there are any red flags before engaging in business with someone who might damage your business.

Tips:

• Debt collection during bankruptcy is different for secured creditors and unsecured creditors. The Australian Financial Security Authority provides clear details on checking bankruptcy and creditors’ rights.
• Keep clear records of all transactions and contact with them. Immediately account for your goods and services.
• Immediately contact the administrator, liquidator, or receiver.
• Call for a professional. EC Credit Control is experienced in the ins and outs of debt collection owing to the 1987 stock market crash. You can evade various early risks by loading your debts through us. We can also help you have strong terms of trade, right from the get-go

5. Managing large numbers of customers

Just having a large customer base can already be a challenge that small businesses can face. More customers mean more work keeping track of every debt. This frequently results in accounts and transactions disappearing or being mismanaged. This commonly occurs when forget to account for the customers – which is likely to happen without good processes in place.

No matter what business you run, you must effectively and responsibly keep tabs on each customer you have. Keep track of customers every step of the way, and plan for the worst. If you need to recover debts, you need a process to do so.

Tips:

• Have someone to keep tabs on all accounts to ensure everything is recorded.
• Comprehensible protocols help a lot when dealing with debts and account receivables in a large number. Automating reminders in your invoicing system is also a must.
• Ensure your debt collection process follows strict timelines and includes a clear process for following up and escalating the debt.
• Guarantee that your debt collection system strictly follows deadlines and has a clear process for escalating and following up debts.

Get Professional Help for Your Debt Recovery Needs in Australia

If you own, run or work at a small business struggling with debt recovery in Australia, you don’t have to go through it alone.

At JMA, we’ve got more than 50 years of experience in debt recovery and credit consultancy, and we can help you recover your debts today.

Give us a call to discuss your business needs.