Last Updated on Nov 26, 2021 by James W
You may not realise it, but proper debt collection is vital for any and every business. Effective debt collection aids cash flow in your company and makes sure that your company can pay its own bills and expenses.
If your debt collection doesn’t work efficiently this can lead to financial problems and major issues for your business.
To help you avoid making costly mistakes with your business’s debt collection efforts, keep reading!
1. Not having contracts, trading agreements or terms and conditions
You might think serious documents like contracts, terms and conditions and trading terms are only for the big businesses, but really, any kind of business should have some sort of agreement for potential clients and customers to adhere to.
It can be intimidating to set up these sorts of documents, and asking people to sign them, however, it’s no more awkward than having to find a way to chase down money from delinquent customers.
These documents can save you a lot of time and money in the long run. They can help to protect your business by binding your clients to the contract terms. And if they decide to not pay for your goods or services, you have your agreement to fall back on.
2. Not doing your due diligence before making a deal
It can be easy to get caught up in the rush and excitement of making a business deal with a new client. But rushing into a business engagement can stop you from having the chance to properly get to know who your new clients are.
Before making any new business arrangement, you should do your due diligence, and find whether you should be transacting with them at all. One of the best ways you can do this is by having a credit report run on potential clients.
A credit report will provide information about their past payment history, and also let you see any red flags along the way.
Taking a little extra time in getting to know a potential client can also help you to forge a genuine connection with them which can help to create long lasting relationships.
3. Not having an account receivables or debt collection process in place
As the receivables area of your business helps to ensure that you have a healthy cash flow, it’s important that it is run properly.
When a business is small, it may be manageable to keep on top of yourself, however, if your business grows, or you’re not able to dedicate the time to this area, it’s important to ensure that someone is able to focus on this. So, you may want to consider hiring a dedicated receivables manager.
As important as it is to have someone who can focus on ensuring this part of your business is being looked after, it’s just as important to make sure you have processes in place that they can use when it comes to debt collection, payments and invoicing.
Setting up proper processes to follow can ensure that when issues do arise, there are ways to handle them.
4. Not getting professional help when you need it
It’s important to remember that you’re not always going to be able to do it all, and that includes debt collection. You need to know when it’s time to ask for help.
Professional debt collection services can save you a whole lot of time, money and headaches. They can also be significantly more effective at collecting outstanding debts and payments from customers who won’t pay.
A debt recovery agency can also help you with credit management, advice and talk to clients for you. The idea of hiring professional debt collectors may seem intimidating, but it might just be the best thing you do for your business!
