Outstanding debts are the bane of many businesses, small, medium and large. Fortunately, you can avoid issues with debt recovery by avoiding these 7 horrible mistakes.
1. Not having a credit policy
You must have a robust and clear credit policy in place before you provide goods or services and receive payment for them. A credit policy provides uniformity of terms across all your clients and means that you are complying with customer protection regulations too.
2. Not being flexible with your credit terms
Although you must have a good credit policy in place, you must also be open to a degree of flexibility. As you get to know your customers over time, you will begin to profile those who are high-risk and those who are low-risk. By using First Capitol Company Vetting & Monitoring (for more information click here
) you will be able to regularly review your customer profiles, which will enable you to tailor your credit terms accordingly, potentially avoiding the need to take debt recovery action in the future.
3. Failing to collect enough up-to-date information about the debtor
If you don’t keep accurate client records up-to-date, it will be very difficult for a debt recovery company to recover the debt for you.
In the first instance, if you don’t have the correct business trading title or a current address for the debtor, any debt related correspondence could be returned to you and doorstep/debt collection will be impossible. I have lost count the number of times we have been instructed to collect a debt and the client has provided us with copies of the invoice/s due and the trading name doesn’t even exist! Our Company Vetting checks can ascertain the correct trading name of the business and who the directors are.
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4. Ignoring how much debt recovery will cost your business
A businesses fortune can change very quickly – going from good to bad. Taking the right recovery steps at the right time can help you to recover what you are owed and minimize any loss. Before commencing any campaign to recover a customer debt, you must evaluate what costs your business will incur in doing so. If your initial attempts at debt recovery
have failed, you’ll need to calculate whether obtaining a county court judgement and then enforcing it are actually financially viable. Knowing your customer is a fundamental rule of business – so is knowing your debtor! If you haven’t got your eyes fixed firmly on the ball you could be throwing good money after bad.
5. Not following up invoices
In order for your credit policy to remain robust and effective, you must train your staff in a formal procedure that will be used to follow up any unpaid or late invoices, and then ensure that they stick to this procedure. Decide for how long you will continue to contact your debtors before commencing formal recovery proceedings and make sure that all your clients are aware of this. Remember a promise is a comfort to a fool!
6. Failing to use effective communication
Often, phone calls are enough to persuade debtors to pay. Some people respond better to letters or emails and others will be prompted into action by a text message. Take the time to find out what methods your various clients prefer and use them consistently. Remember to instigate a “cut off” point. If your debtors fail to respond within the specified time, then it is time to use our more formal methods of recovery. For more information click here: https://www.firstcapitol.co.uk/services/debtrecovery/
7. Failing to ask for professional help
Always bear in mind that some debtors can be especially stubborn and you may struggle to persuade them to pay. Often, the use of a professional debt recovery agency is far more effective in recouping your money than struggling for weeks or months on your own.
Keep your company’s cash flow coming by avoiding these 7 horrible debt recovery mistakes. If you’re struggling to persuade a client to pay up, consult the professionals: www.firstcapitol.co.uk