How to collect business debt


How to collect business debt

How to collect business debt – the very first area I am going to address is cash. Simply put, many small company owners are not conscious and aren’t able to track their cash flow. They view a day-to-day basis at exactly what is in the bank, without any planning whatsoever.

The most convenient and most basic method to take care of this is using an Excel spread sheet to record exactly what money is coming in, what payments are to be made, what cheques have been composed, what outstanding monies are due in and prepare day by day. So simply put, firstly see exactly what is in the bank, where is it going and what is anticipated to come in.

It is very simple – untill you begin to determine something and track it, it isn’t really under your control.

The next issue is outstanding business debt – have you got debtors that owe your company? Exactly how long are they outstanding? Just ask yourself, what are you going to do, to get that money in?

First of all, think of how you are currently doing business and ask how do you work at present? What are your terms? Have you altered them or made them much shorter? Can you work on COD? Or for service companies, can it be prepayment upfront or possibly in many cases, can it be 50 % upfront. Whatever level of cash you can get in advance, in today’s environment, is cash in hand.

Another point we are going to discuss is collecting outstanding debts. This is everything about really chasing after the cash – the part that no one likes. This has to be done frequently and commonly. Individuals have a belief that they will lose their clients which no one will return. The truth is that these individuals have not paid you – they are not clients. Get your cash in – they understand that they owe you the cash and they understand that you deserve to telephone them and ask for the cash owed to you.

I would encourage that you utilize a script when speaking with them on the phone, so that you are brief, respectful however yet strong. For instance: when does it suit you best to come and pay – today? Or tomorrow? Friday or Monday? Pin them down to a time and day, record that time in your journal and make certain there is a follow up call set up. Establish a system, schedule in your time so that everybody is called and it is tracked routinely. If you have 50 individuals to go after, exercise the number of calls you can do in a day, track them, and jot down who stated exactly what. Have actually a particular cut off point. If it exceeds 3 or 4 telephone call, you have to go and see the individual.

Simply put – he who screams loudest has far more opportunity of collecting monies owed to them.


How to collect business debt

How to collect business debt

Collecting commercial debt is tricky, at the best of times.

To make things easier on yourself, consider the following:

  • Have a good admin system in place, where all the necessary documentation, per client, is kept in good order:
    • the credit application (with terms and conditions)
    • Credit Risk Assessments
    • invoices, statements, proof of delivery
    • client details (contact details of relevant key personnel)
  • know days outstanding, start contacting non paying clients asap
  • obtain credit information reports on all clients, at least once a year – and decide on the probability of doing business with each client

 

 

Also consider:

Step 1 – How old is the account?

If it is under 90 days old, then you can try to collect without a collection agency. If it is older than 90 days, then it is better to give the account to an agency. Just looking at the numbers, a collection agency will have a better chance to get your money back.

Step 2 – Decide who will handle the debt.

Then move to step 3.

If you think a collection agency will handle the debt then it is best to choose the right one for your needs. Different industries use different language and the more a company understands the language and the industry used in it, then the more likely they are to collect for you.

Step 3.

If you decide to contact the debtor yourself, make sure you document all of the communication. Even if the debtor does not respond, make note of the attempted communication. The squeaky grease gets the wheel as they say, and this is just as true in debt collection.

With proper credit management, defaulting debtors need not be a headache.

Call us now on 011 907 4406 to be of assistance.