How to avoid Debt Collection
It goes without saying that a business needs cash flow to keep operating. If too many customers forget, delay or refuse to pay, your business could end up in serious trouble!
No matter what sort of business you run, chances are you’ll run into chasing outstanding debts. Sometimes, this customer or client will make an honest mistake and simply miss a payment. Other times, they’ll actively avoid you. There are plenty of good strategies for collecting the money you’re owed. Here are five smart ways you can encourage your customers or clients to start paying you on time:
1. Accept Credit Cards
While accepting credit cards isn’t appropriate for every business, it enables you allows you to place the burden of debt collection on a third party. The small fee involved to accept credit cards is much less than the cost to hire a solicitor or outside agency to chase outstanding debtors.
2. Do a Credit Check
Credit checks can take a little time and money, but are especially important when your client or customer is making a large purchase. Don’t bother running one for a small transaction; it simply isn’t worth your time. But if you’re entering into a long-term relationship or one with a large impact on your bottom line, run a credit check. It might not guarantee payment, but it can help you avoid problem clients and customers up front.
3. Check References
A credit reference is important if you’re entering into a large or regular business relationship. Get references form your potential client’s past business partners and make sure those partners had positive experiences and were paid in a timely manner.
4. Write a Good Contract
More businesses are finding opportunities to enter into fee arrangements as part of the engagement process. This may involve a fixed fee agreement with staggered payment terms rather than fees based on time and materials .
Putting the terms of your arrangement (including the payment amounts and due dates) in writing is a must. Your customer agrees to the terms in writing.This ensures that the termsthat are clearly communicated and agreed upon.
5. Make Polite Contact
If a client is behind in payment, it’s possible they just forgot. A polite reminder can do wonders. A phone call, email, or letter that simply reminds them they’re behind is the best way to start . No matter how diligent you are selecting business partners, you can end up dealing with the debt collection process to handle slow payers. By following the suggestions above, you can effectively reduce the amount of problem debtors you’ll have to deal with.