Cash flow problems can happen to the best of us.
As such, it is prudent for business owners to be ready to deal with their clients or customers who have outstanding debts.
This will help fill the financial gap.
Studies show that debts that are overdue by a month are 93.8% likely to get settled. Interestingly, those that are outstanding by about three months have a 74% chance of being paid off; however, this drops significantly to 24% chance if the debtors have not paid after twelve months.
What this data tells us is clear – the longer you wait to collect on your money owed, the less likely you are to receive it.
Such statistics point toward the need for Australian businesses to have sufficient measures in place for debt recovery, specially as debt recovery becomes more automated.
Given this, below are five useful tips on how you can recover your outstanding debts quickly, effectively, and professionally.
#1 – Ensure Your Terms Are Agreed Upon
Make sure that you place emphasis on the terms and conditions that all parties signed and agreed upon; this should be done early in the relationship.
The signed document is a legally binding contract that state the expectations, responsibilities, and consequences for all involved interests. It helps establish legal grounds for taking the necessary action in case the debtor defaults on payments.
Failure to outline your terms and conditions may place you at the mercy of your customers and their payment process.
Such a thing can impact your ability to have and maintain steady cash flow, and this can compound the ability to recover the money owed.
#2 – Call The Clients Regularly
Keep in touch with your customers at least once a week. It is an effective and economical means of ensuring they honour their word. You can even send a written debt collection notice.
You should be confident when talking with your client. Also, be ready for their responses.
You will need to have a follow-up process in place to help you respond adequately to whatever they have to say. For instance, a customer may claim not to have received an invoice, you can then email them a copy as you talk with them on the phone and ask them to confirm receiving the email.
The most important thing to do is to stay in touch. This will ensure that you know when overdue debts will be settled. You should ask your clients when you can expect to pay from them so that they confirm the date and amount they are to give before hanging up the call. It will be confirmation of a verbal commitment from the debtor.
#3 – Maintain Your Cool When You Collect
You should do your best not to let your emotions and frustrations get the better of you, especially when you are dealing with a customer that is unresponsive and unwilling to comply with the agreed terms for the loan.
Keeping your emotions in check as you deal with debt collection can improve your chances of success. Staying calm will help you think objectively and come up with the best course of action that will ensure you receive the money owed. In contrast, letting anxious thoughts creep in can disrupt your rational thinking and leave you vulnerable to a negative outcome.
If it is by following up on the debtors that you discover why they are late on their debt payments. Some may be experiencing some financial hardship and you can assist them by offering favorable payment plans that will ease things for them.
Such a move can help them settle the loan without being under a lot of financial pressure.
#4 – Put It In Writing
At times, the phone discussion may not yield any positive results and the debts will remain outstanding.
If such is the case, you then need to pen down a letter that outlines the breach of the terms of the loan. It also should include the outstanding amount, and the attempts made to contact the debtor seeking settlement of the overdue debt.
Keeping communication in writing is key to reaching a favorable outcome, explains the financial experts from Robinson Accounting. They note “just as in finance, staying on top of communication in areas of money owing can ensure you are given what is rightfully yours. It can be a challenge to show proof of debts owed without a paper trail, so make sure you always get verbal agreements in writing too.”
#5 – Hire A Reputable Debt Collection Agent
If you are sure that you have exhausted all options for collecting the funds owed, you should consider the services of a professional debt collection agency.
In case you do not have a formal contract with your client, you need to present to the collection agency a complete record of what was carried out and as many relevant details as possible regarding the loan for them to help recover the money.
A reputable and experienced debt collection agency will assist you to get the essential information needed before they start the recovery processes.
The debt collectors are professionals expected to abide by a certain code or ethics when dealing with you or your debtor. They should adhere to the ACCC debt collection standards and guidelines. Overall, you should ensure that your relationship with your clients are maintained and not tainted by the debt recovery process.
Are You Ready To Get What You Are Owed?
You should make sure that you set your expectations and have the terms of the loan agreed upon and signed before the customer receives the requested credit extension. If the payment is overdue, then you can effectively recover your funds by call and confirm all is well with the debtor via the phone. The idea is to keep in touch so that you are up to date on when they are likely to pay.
Remember to maintain your cool when discussing the repayment schedule and be willing to offer favorable payment options that will help your client settled the outstanding debts. Also, do not forget to make and keep a record of all communication.
If you do the things stated up, then the debt collection process will not be that stressful or difficult. Such measures will ensure your customers meet their obligations and your business has a steady cash flow.
Alex is fascinated with “understanding” people. It’s actually what drives everything he does. He believes in a thoughtful exploration of how you shape your thoughts, experience of the world.