Having difficult customers is part of running any business, and for many New Zealand business owners, chasing overdue or unpaid debts is an unfortunate reality.
Picture this: You’ve provided your services, and the due date for payment has passed, but your client is nowhere to be found. It’s frustrating, and you can’t afford to keep chasing payments indefinitely. Unfortunately, this scenario is all too common.
According to Xero, the global small business platform, the cost of late payments to Kiwi small businesses has surged by 81%. The numbers have increased from $456 million in 2021 to $827 million in 2023.
While it’s tempting to write off these debts, that can hurt your income flow and hinder growth. Instead, it’s important to approach the situation strategically.
At Slater Byrne Recoveries, we understand the challenges. We’ll highlight five techniques in negotiating payment plans with debtors so you recover your hard-earned money and maintain positive client relationships moving forward.
Risks of late and unpaid payments to your business
The effects of late and unpaid payments can be far-reaching. When payments are delayed or not received at all, it can seriously impact your business, leading to:
- Financial Disruptions – Cash flow is the lifeblood of any business. Late payments can create gaps in your income, making it harder to cover operating expenses, pay staff, or invest in growth opportunities.
- Increased Debt Recovery Costs – Going after overdue payments is time-consuming and costly. As debts accumulate, the effort and expenses to recover them grow, especially if legal action becomes necessary. Under New Zealand’s debt collection laws, businesses can engage professional debt collectors if required, but this comes with additional fees.
- Damaged Relationships – Constantly chasing late payments can strain customer relationships. A good relationship with your clients is vital for repeat business, and late payments can jeopardise this.
- Impact on Credit Ratings – Unpaid debts can affect your business’s credit rating. As a result, it will be even harder to secure loans or favourable terms with suppliers.
- Legal Consequences – If payment disputes escalate, legal action may be required. This can be both costly and damaging to your reputation, especially if the matter is taken to court.
Understanding these risks highlights the importance of addressing late payments promptly.
5 Viable Techniques for Negotiating Payment Plans with Debtors
Payment plans can be an essential part of maintaining your company’s financial health. While it can feel uncomfortable, using the right approach can help recover owed funds while preserving positive customer relationships.
1. Open Communication
Start by initiating a conversation with your debtor to understand their situation. Be empathetic and ask questions to learn about any financial difficulties they may be facing. Open and honest communication can lead to a more reasonable and effective payment plan that suits both parties.
2. Offer Flexible Terms
Consider offering flexible payment options, such as instalments or extended deadlines. New Zealand businesses can work within legal frameworks to adjust payment terms if necessary. This can make it easier for debtors to meet their obligations without risking non-payment.
3. Create Clear Agreements
Once you’ve agreed on the payment terms, ensure everything is documented in writing. A formal payment plan helps protect both parties and can serve as evidence if the agreement is breached. According to New Zealand law, it’s important that any agreements made are clear, unambiguous, and fair to both parties.
4. Be Professional and Patient
Maintain a professional attitude throughout the negotiation process. Treat the debtor with respect and avoid aggressive tactics, as this can harm your reputation and damage the business relationship. Patience is key in allowing the debtor time to respond and follow through on the agreement.
5. Set Consequences for Non-Payment
Make the consequences of failing to meet the payment terms clear, but avoid threats. Legal action or engaging a debt collection agency may be necessary if payments are missed, and this should be outlined in the payment plan.
Under the country’s debt collection practices, firms have the right to take action if payment plans are not adhered to.
Sit Back and Relax While We Handle the Debt Collection for You
Let us take the stress out of debt collection while you focus on running your business. Slater Byrne Recoveries’ experienced team will manage the entire process, ensuring efficient recovery of outstanding payments.
Secure your free consultation with us today to find out how we can support your business!