There’s no perfect business, as much as there’s no ideal business owner. How you manage things is entirely up to you, your beliefs, and your business philosophy.
However, you’re bound to make mistakes here and there, and even the most seasoned entrepreneurs have found themselves in a bind. To help you out, we’ve listed down some common mistakes that affect business, especially when it comes to debt collection.
Being too trustworthy
If one of your selling points is that you offer credit to clients, doing so without proper research can harm you sooner rather than later.
While we understand that the goal of a business is to create profits and gain clients, we should always be wary of potentially bogus buyers or scammers. The fastest and easiest way to screen new clients is to request for a credit report. Get one of themselves and of their business, if applicable.
Credit reports of businesses include the following information:
- ASIC current extract
- Fresh ASIC/Business Name Search
- Adverse information on all of the Partners/Directors
- Default information on all of the Partners/Directors
- Past Credit Enquiries on all Partners/Directors
- Summary of Partners/Directors business relationships
- Insolvency details
- Bankruptcy details
Personal credit reports include loans they’re currently paying off, how much they’ve paid off of their debt, and if they have missed any payments. Their credit score will be dependent on how responsible they are in complying with payments.
Without a credit report, think of yourself blindly walking into a dark room; it would be highly risky and hinder the growth of your business.
Not getting enough information
Even if you don’t offer credit to clients, it is important that you have enough information so you can easily track orders and contact the buyer when the need arises. You should have their full name; address; email address; multiple phone numbers; and if a business then also get business license information.
Make sure to have these up to date, and it won’t hurt to have clients update their contact information at least once a year.
Poorly managed receivables
Not following up on payments says a lot about you as a business partner. You will appear disorganised, scatter-brained, and people will think that they can get away with not paying. If you have difficulty following up on payments, you should have a system in place to help you manage tasks better. Better yet, enlist the help of professionals to do it on your behalf.
Not offering a contract
Without a contract in place, it will be hard for you to not only follow up on payments, but also contest whatever negative claims a client may make. You should draw up a Terms and Conditions contract so that every transaction is legally binding and you have a paper trail to follow when things don’t pan out the way you want them to. A Terms and Conditions document includes:
- Payment schemes and schedules
- Refunds and return policy
- The services and/or products you will provide
- Your guarantee that the services and/or products are of high quality
There are other sections of the document that you may wish to add to ensure smooth sailing, such as what you intend to do when the buyer doesn’t pay on time or not at all.
You don’t prioritise debt collection
Again, having a systemised process of organising receivables is highly important in properly managing cash flow. Without money coming in, you’re bound to pay for things out of pocket or worse, you might end up filing for a loan.
A debt collection agency helps business owners tackle the task of recovering overdue payments. Consider hiring one from now on.
Get the right debt collection agency
In every industry there are highly rated companies and there are those that are notorious for their bad service. A debt collection agency should never harass your client or resort to using unethical ways of collecting debt.
Go for a debt collection agency that has a number of years of experience under their belt and one that is highly rated. Before jumping ship, make sure that you aren’t doing so prematurely. Make sure that you have given the debtor enough time and warning to warrant the need to hire professionals.
There are questions you should ask a debt collection agency before hiring one:
- Are you fully licensed and qualified?
This is a must, and you shouldn’t deal with shady personalities or people who aren’t licensed by the Australian government.
- How long have you been in business?
An indicator of a good debt collection agency is how long they’ve been in the business.
- Do you offer a No Recovery, No Fee Service?
A reputable agency won’t charge you unless they have recovered debt that’s owed to you.
- Do you provide a dedicated account manager?
Having one person to deal with your receivables shows the dedication the company has towards helping you recover debt.
- Do you have in-house solicitors specialising in debt recovery?
A reputable debt collection agency won’t hire outsiders or third party entities.
They should have their own group of solicitors they can closely monitor.
- What are your collection fees?
Know how much their services will cost you when debt collection is a success.
What information do I need to provide?
When you’ve successfully gotten in touch with your agency of choice, they will ask for information regarding the debt.
- The date the initial invoice was created
- The date the initial invoice was due
- A copy of the original invoice
- The balance
- Your business terms and conditions
- Any other relevant information (follow up letters, details of products or services delivered, work orders, signed quotes etc)
JMA Credit Control is here
Debt collection doesn’t need to be a burden on your end when you have JMA Credit by your side. With over 50 years of experience, our team has had success recovering debt on behalf of our clients. We are an Australian-owned company with offices in Melbourne, Sydney, and Brisbane.