Debt recovery can be tricky and it isn’t as clean cut as we may think.
It requires negotiating, patience, and a lot of effort — things that a business owner may not have the luxury to do. With so much on their plate, it’s no wonder that debt recovery can take a backseat.
We’ve explained below how accumulating client debt can be lessened – even prevented – and how professionals like JMA Credit (link) help business owners such as yourself deal with unpaid invoices.
Avoid Debt
Debts can be accumulated fast. They can get our of hand even faster. One of the best and most important things you can do is to prevent the accumulation of client debt in the first place. There are ways, all surprisingly simple, that can help your business run more smoothly:
Improve Your Terms and Conditions
That is, if you have one in place already. If you don’t, now is the time to start implementing one.
A Terms & Conditions document is a legally binding agreement between a business and its customers which details how transactions are to be conducted. Everything from payment schedules, shipping & handling, as well as refunds and returns are in this document. You can learn more about it here.
If you have a T&C’s document already, study it with a professional. You might have a loophole that allows clients to incur debt, or your terms might be too flexible. While offering flexibility is certainly a plus factor in enticing new clients, you need to make sure that your terms are fair enough and shouldn’t affect your cash flow.
Send Out Invoices On Time
There is no reason for you to delay giving out invoices –after all, this is what tells your clients how much to pay and when. If you offer net -30 days payment terms, do take note that days begin to count as soon as a customer receives an invoice. Even if you have successfully delivered a product or finished a rendered service, as long as no invoice is sent out, the client won’t pay up.
Follow Up
As much as you want to trust your client to pay on time, you can’t really let your guard down. Assuming that your client will always hold their end of the bargain is foolhardy and will land you in a maze of trying to recover debt, managing cash flow, and continuing running your business on top of that!
It’s as simple as reminding them a day ahead of the deadline and if they haven’t settled their payment after, remind them again. Following up may sound like a nuisance, and it certainly is on the part of the debtor. They’re bound to pay instead of constantly getting emails about reminders.
Three Debt Recovery Strategies
These three debt recovery strategies are used by debt collectors to ensure that each case they handle is successfully fulfilled. While situations differ from one another, at the end of the day all debt collection processes have one goal in mind: to make sure debts are paid.
Empathy wins
Debt collectors are well aware that when they start approaching debtors, they’re bound to either be ignored or get a mouthful.
It pays to be polite and ask why they haven’t paid. Sometimes it’s as simple as forgetting the payment due date, other times not so. Personal problems might have arisen and caused the client to be financially incapable of paying their debt.
When a debt collector is empathetic towards their situation, it gives them a clearer understanding of how to deal with the case at hand and provide solutions that will leave both you, the business owner, and the client in better financial terms.
Solutions that work
A debt collector who simply demands payment won’t be getting the results they need. If the customer’s financial situation falls on deaf ears, chances are they won’t be giving you what you want – which is debt recovery.
But when an agent can come up with a solution, it kills two birds with one stone: helping the customer manage their finances better so they can pay off their debt, and you get your money back. It’s a win-win situation!
Flexibility – In terms, that is
Even when there’s a solution, as long as the payment terms aren’t flexible chances are you’ve just hit a roadblock. Flexibility should be afforded to those who can stick to the payment scheme and who can communicate openly to the collector about their situation.
JMA Credit To the Rescue
JMA Credit Control is very much aware of the many pitfalls of running a business, one of which is the issue of unpaid debts and the hassle of debt recovery. When you have a good business practice in place, as well as a reliable and trustworthy debt collection agency like JMA Credit as your partner in debt recovery, you should expect things to be smooth sailing from here on out.
