How to Prevent Bad Debt in Your Business
Conduct thorough checks and set limitsYou should conduct credit checks for every new customer in order to ensure that they have a reliable credit history. Setting up clear terms that are mutually understood by the customer and your business minimises the risk of incurring debt. You may make the mistake of trusting a new customer to pay back a large amount of money based on your previous experience with other clients. But not every customer will have the same attitude towards your terms. Consider implementing a lower credit limit with new customers until you are certain that they will pay you back on time.
Check your invoicesGiving the customer clear and correct invoices can make it more difficult for them to delay paying the money. For example, a customer cannot argue that their payment was late because they didn’t have your bank details if they were stated on the invoice. Consistently monitoring when your payments are due can enable you to stay on top of your finances and give you time to contact a customer if you anticipate late payment.
Seek professional helpIf you are struggling to claim back debt from your customers, it may be time to consider using an external collection agency. This is more likely to prompt payment than your repeated attempts at phoning and emailing the customer, as debt collectors tend to have a stronger impact. This enables you to retrieve the money that your business is owed at a much faster rate. If you are considering using outsourced credit management, contact First Capitol Connections today. We offer a range of services, including credit control, doorstep debt recovery and credit checks that can help your business to thrive.
Enforcing Debt Collection
Why debt collection needs to be more than a threat
Chasing bad debts isn’t a position that anyone wants to be in. It comes to a time when the next steps need to happen when payment is not forthcoming. It’s at that stage where many people will start thinking about the next steps and considering debt collection.
Making the threat
At this stage, a vague threat of ‘further action’ is often sent and ignored. Without anything specific, this could lead to the debtor not taking it seriously. A lot of companies try to make an empty threat without ever having the intention of following up on it.
If a debtor starts to receive a few of these letters or calls saying the same thing, then they will soon realize that the ‘further action’ is never going to happen. A lot of the time bad debtors need a lot more persuasion.
Affecting your reputation
There is little doubt that different companies get different reputations for chasing debts. If you’re worried about being a pushover then not actively chasing your debts is going to be the wrong way to go about your business.
There is also insolvency to consider. If you leave your bad debts for too long then the likelihood of bankruptcy increases. This could leave you with no payments and a lot worse off than if you turned to doorstop collectors a lot earlier.
The only real way to persuade people to pay it to make sure that they know the consequences of their actions. Using a reputable debt collection company will not only get results from the debts that they’ve targeted but it will also have a positive effect on your reputation and your ability to get debts paid quickly in the future.
Here at First Capitol, we are experts in making that a reality. We’ll be able to deliver on your needs and make sure that you are getting the highest possible return for debts which might otherwise pay back very little. Contact us today to make sure that you will be able to increase your cash flow, prevent bad debts and have a more profitable business.
How to use a debt collector
How to use the threat of a debt collector
No one wants their debts to be in the hands of debt collectors, but for whatever reason, that’s where a lot of them end up. Collecting bad debts isn’t a place where a company or an individual wants to be either, but the threat of debt collectors can be very useful.
If the debtor is overdue on their payment then it’s time to start taking firm action, explaining via a call the steps that could be taken to recover a debt can be a very effective means of getting the money you’re owed. It’s at this stage, however, that many people bury their heads in the sand and stop answering phone calls if they know they’re going to be chased for money.
If you have lost contact with someone who owes you money, sending a letter can be a great way to get through to them. Underlying the threat that the case will be passed to debt collectors is often enough for a lot of people to get back on to the phone and make a payment. While people ignore calls, far fewer people ignore letters, and they’ll understand what the threat is.
The final step
As with any threat, it only ever works if the person on the receiving end actually believes you’re going to do what you say you’re going to do. If all other opportunities have been exhausted and they have used up all their chances, then it’s time to follow up on your threat and start using doorstep debt recovery to get you back the money that you’re owed.
If the debtor, or anyone else, owes you money in the future, they will know the steps that you’re prepared to take in order to get back what’s rightfully yours. There is no courtesy in a situation like this; if you are owed money, then you need to get it back, by whatever means.
If your debtor has used up all their chances, then call First Capitol today and instruct us to finally collect the money that was lent out in good faith, and we will do everything in our power to settle your debt.
Find the right debt collections agency
The key to finding the right debt collections agency for your business
Finding the right collections agency is essential to making sure debts are recovered in as timely and as professional a manner as possible. When you’re considering an agency to partner with to collect any outstanding debts, here are some of the key things you should be considering.
What’s their reputation?
A collections agent is an extension of your business in the eyes of many people, and how they conduct themselves will be reflected on you. It’s important that you do some digging on any companies you’re considering working with, to learn about their reputation and their approach to debt collections. If they’re surly or unprofessional, not only will that make it less likely the debt will be collected efficiently, it will also have a negative impact on the way your business is perceived. Don’t be afraid to be discerning, your reputation is at stake.
Are they properly experienced?
Not all debt collections are the same – for example, a completely different set of skills is required for consumer debt as opposed to commercial debt. Determine what kind of debt collection you need, and then make sure that your collections agency has provable experience in that field. Debt collection is a sensitive process, so it pays to do a little extra legwork just to make sure you’re trusting the task to experienced professionals. Ask about your collections agency’s previous experience, and solicit references wherever possible.
What are their fees and contract terms?
Every collections agency will structure their fees in different ways, so make sure you understand exactly the costs involved before you sign any contracts. Also, make sure to ask detailed questions about how they’re going to handle your collections, the time frame of those collections, and what happens if the collections don’t go according to plan. Know as much as you can about the way the collections agency operates ahead of time – it will allow you to make the most informed possible decision about who you’re going to work with.
A trustworthy collections agency is an invaluable asset – it’s worth investing the time to find the right one for you.