Delayed payment is a major cause of cash flow issues for small businesses. While trying to get money owed from customers/clients its important to find a balance. Debt collection gets easier with practice, you might feel reluctant to ask but you need to take up courage as cash is a vital when running a small business. You cannot afford to be too lenient (this can lead to bankruptcy) or too strict (this can lead to you losing valuable customers),however you must be professional without being too aggressive.
Here are tips to aid small businesses with debt collection
– Have a credit policy, clearly state payment terms, make sure the payment terms are agreed on at order stage. Do not make assumptions.
-Get your invoicing right ; make sure goods and services being paid for are clearly specified on the invoice.
– Get to know a customer before extending credit to them; do not assume a customer will pay. Assess the value of the client /customer, check their credit history, get credit references from them or get an agreement /contract written and signed especially if a huge sum of money is involved.
– Develop a system for following up on payment, once payment is almost due ,send a reminder to clients/customers.
– Avoid making threats or agitating client/customer ( assess the value of the customer, a customer that’s unable to pay up today might hold prospects of spending much more in the same company in the future ,be guided!!!).
In cases where payment is not forthcoming
– Call the customer/client to get a definite response
– Device payment options that can work so you do not end up losing all the money.
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– Write a certified demand letter (letters like this must not be forged, the implication of forging can far outweigh the money at stake)
– Engage a debt collection agency, seek legal advice, check out the cost of that in order to determine if it will be worthwhile.
Make every case of late payment a learning experience which should help you safeguard your credit and prevent recurrence in the future.
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