Debt collection can be quite a complex territory for small businesses. On the one hand, it is crucial for securing the company’s cash flow and ensuring it succeeds. But on the other hand, it’s a delicate process that requires expert skills and a significant amount of time. Plus, it leaves a lot of room for error.
Although mistakes are sometimes effective tools for learning, there are just some debt collection blunders that cause too much damage and must be avoided at all costs. Here’s a few you definitely must steer clear of:
Small Business Debt Collection Mistakes
1. Not properly screening clients
Extending credit to clients is a big deal because it’s a transaction where you are the vulnerable party. After all, you provided a product or service that cost your company money and you’re relying on nothing but your client’s word that you’re going to get paid. This is a considerable risk, so you must make sure you’re only extending credit to clients you can trust.
Before you enter into an agreement with an individual or company, run a thorough credit check on them first. Analyse their credit history so you can avoid any unpleasant surprises in the future. You can also ask to see their most recent financial statements so you’ll know how they’re doing.
2. Neglecting accounts
As a small business owner, you might feel like there are a million different things you need to deal with on a daily basis. So, it sometimes feels easier to just put off tasks that don’t seem that urgent, like following up on delinquent accounts. But, the longer you postpone dealing with overdue invoices, the harder it will be for you to collect payment. Keep in mind that credit and collections as essential to your business as other processes, such as sales and marketing.
Always keep an eye on your accounts receivables and establish a clear debt collection process. Also, set up a schedule for when you need to contact clients to follow up on payment. Don’t wait until the invoice becomes overdue.
3. Not asking for help when you need it
Although it is a good idea to try to recover debts by yourself, it’s also wise to know when to ask for help from experts. This is especially true if you’ve had several failed attempts at contacting your clients. Perhaps they have moved to another town, gone out of business, or have sold some major assets. In cases like these, you need a professional debt collection agency to help you navigate through the process.
This is exactly what we do here at Slater Byrne Recoveries. With our team highly skilled and experienced professionals, we can help you recover even the most delinquent accounts. And the best thing is that you only pay us when we successfully collect your debts. Find out more about our services by calling us at 0800 445 870.
4. Not having clear payment policies
As a small business, your survival depends largely on customers paying for your products and services in a timely and consistent manner. But how are clients going to pay you when they are not quite sure when or how to?
You must establish clear payment policies with your customers at the onset. These terms should include how and when you get paid. Make sure they fully understand and agree to your terms. If there’s something they are not quite happy with, be open to negotiation. If possible put your terms in writing. Include it in your contract as well as in the invoices and reminders you send out.
It’s important to remember that although these mistakes seem grave, they are not inevitable. You can take steps towards making sure you do not fall into these traps. Take a good, hard look at your current collections process and make the necessary changes. This way, your small business debt collection will be more efficient and successful.