When you operate a small business, every client payment has a major impact on your bottom line. A significant payment received late (or not at all) can make the difference between paying bills associated with your overhead costs, and paying your employees or subcontractors for their work completed. As a result, debt recovery solutions are an integral part of your business strategy if you want to ensure that you have the financial backing to remain in business. There are some do’s and don’t’s associated with corporate debt collection that you should be aware of:
Corporate Debt Collection Do’s
- Make sure clients are well-versed in your payment terms before you begin a working relationship – according to Business Know How, setting clear guidelines about when and how payment is due up front can alleviate future payment issues. Ensure that these terms are put in writing.
- Make clients familiar with the repercussions of paying late – sometimes clients need an incentive to pay on time. You can offer a discounted rate for payment received early by a certain date. Or, you can provide a negative consequence by adding a set interest charge.
- Stay in touch – when a client has an overdo account, don’t back down. You can provide friendly reminders on a regular basis that their bill is overdue and ask them when you can expect payment.
- Make sure all collections-related communications go to the right individual – communicating with a low-level administrator that has no control over the company’s finances will not get you as far with collections as dealing with someone who issues payments for a living. Try and find a point of contact in management or accounts payable that can actually have an impact.
- Hire a debt collection agency – a debt collection agency can take on the task of recouping late payments, which many business owners find incredibly stressful.
Corporate Debt Collection Don’t’s
- Don’t expect clients to understand your payment requirements if they haven’t been communicated – if you never implicitly communicated payment terms to a client, then do not automatically expect that they know. You need to be direct for collections to be effective.
- Do not be too aggressive when making collections calls – if you are at the point of trying to collect from a client by making regular calls, make sure that you remain professional. Remember, that a late payment is not personal. In many cases, a company may fail to realize that they are dealing with a small business that relies on every payment to survive.
- Don’t be wishy-washy – when talking to a client about a late payment, do not back down. Even if they come up with a good story about why they cannot pay you immediately, do not be understanding to the point that they think they can walk all over you. You can be empathetic, but do not budge on your payment requirements.
Article contributed by Jenna Smith