We know how painful debt can be. And we also know how hard it is to recover. We are professional debt collectors for a reason. We understand debt and how it hurts. So, we’d like to pass on some wisdom for preventing bad debt from building up and taking over your finances, like an ugly weed.
Bad debt can be crippling for an individual or a small business. So, it’s best to prevent bad debt before it starts to grow.
As a small business, bad debt can be a financially painful and even disastrous experience, especially if cash flow is tight. When it comes to bad debts, prevention is always better than the cure, particularly when it comes to the impact on customer relations. As a small business owner, there are a number of steps you can take to prevent late and unpaid client invoices from happening in the first place.
Check their credentials:
For larger transactions, conducting a credit check on a potential customer can give you some idea of their ability to pay on time. We can provide varying levels of credit and financial reports for businesses you are considering taking on as a client or customer. It may also be a good idea to speak with industry contacts such as other suppliers or business owners. In some cases, you may be able find out about customers who have a frequent habit of making late or non-payments.
For large sales or long-term projects, it may be advisable to ask for partial upfront payments before delivering the product or service, according to Small Business NSW. For example, a business may ask for a 25 per cent upfront payment before beginning a project, with the remainder to be paid on completion.
In the event the client fails to pay in full, your business will still have recouped some of the losses. Alternatively, it may be possible to ask for staggered payments, with customers invoiced for each stage of a work project. This can be especially useful for freelancers and contractors who may need a regular source of income while working on the project.
Agree on payment terms:
Where possible, ensure you have an agreement in writing regarding payment policy. This not only provides clarification to your customers but can also assist in the event of legal action. Invoices need to be professional and detailed, listing each specific charge and how it relates to the products or services your business provides. It is also extremely important to detail payment terms and payment options on invoices – otherwise, your customers may decide to pay by their own terms!
Offering incentives to pay on time can also be effective, such as discounts for early repayments. Alternatively, attaching late penalty fees or interest can motivate customers to pay on time or reap you financial compensation for late payments, but it may also damage the relationship with your clients.
In many cases, customers who fail to pay on time may have simply forgotten the matter. If you don’t hear back from a customer shortly after sending an invoice, follow the matter up. Send regular, but polite reminders by mail or email. Remember, it’s your income you’re searching for, so you can follow-up multiple times. If the customer fails to respond, try calling. However, avoid any form of harassment or even publicly “naming and shaming” late payers – this is not only unprofessional, but it can also expose you to legal action.
With so many other duties to tend to, small business owners can often fall behind on collecting payments. Ensure you have an efficient, up-to-date database of customers and outstanding payments. Accounting products such as MYOB usually include invoice records software, or you can use a generic spreadsheet product. That’s where Prof Coll can help. We the debt collection experts that you can trust to collect your cash. There are no joining fees; if we fail to recover your debt, then you won’t be charged a cent.
Of course, if all else fails, you can take the next step outsourcing your debt to an experienced debt collection agency. This allows you to receive more cash sooner, focus on core functions and reduce your operating costs, if you get to this point you can call us here at PCS on 1300 799 067.
Why Prof Coll?
Sometimes bad debt happens and you may need some experts on the scene to help collect it. If you need some bad debt collected, we can help! We are an expert debt collection agency that can deliver results, professionally. We want to get your cash back to where it belongs. So, inquire about your debt today and we’ll get to work learning about your business and returning your money back where it belongs. At Prof Coll, you only get paid if we do. We assign dedicated managers that will individually assess your situation and to produce the quickest outcome.
We aim to provide affordable debt collection for small businesses and individuals who have found need some help with bad debt. Invest in 23 years experience when you need some help recovering bad debt.