There are many businesses experiencing cash flow issues for the past 1 year and therefore, itís crucial to ensure that business owners are ready to handle customers that have outstanding debts.
The chances of paying a debt that is overdue by a month are 93.8% while the chance when itís overdue for 3 months is 74%. When the debt is overdue by a year, chances of paying that debt reduces to 24%.
These statistics show that businesses should have a good debt recovery process to assist in collecting debts efficiently and quickly. These are 7 killer tips for collecting debt from clients.
- Make sure that your terms are accepted
Having emphasis in the early stage and having the terms and conditions signed by the involved party creates a contract that is legally binding. This will set everything clear including responsibilities and expectations. In case the matter escalates, this can be useful when you want to take legal action or hire a professional debt collector
When you fail to outline the terms and conditions, if the customer fails to pay the money, you wonít have any legal action against him/her. This will affect the ability to maintain a reliable cash flow position and recovering the money becomes harder.
- Always call your client regularly
You should your client one every week as it is more economical and effective than written debt collection messages.
Have confidence when speaking with the client and be ready for any response. You can be ready by putting in place a follow-up process of what they will say. For instance, if the client says that they havenít received any invoice, email them a copy of the invoice while still on phone and wait for them to confirm that they have received it.
To know when the debt will be paid, let them tell you when they will make the payment and let them confirm the date and the method of payment before ending the call. It might confirm the commitment of your client.
- Demand 100% payment
Go straight to business and ask the debtor to clear all pending dues. When you do this way, you might recover some of the money in a reasonable time. Whenever you call, ask the client to clear all the arrears. This will minimize pending dues.
- Be calm and cool when collecting the money
We might find ourselves letting frustrations and emotions to take control when a client fails to pay their bills. However, we need to control our emotions as it will allow you to think clearly and perhaps you will find out the best solution to get the money paid on time.
During the process of recovering your debt and you realize that the debtor is experiencing financial hardship, offer him or her payment plan options so that the client can pay you without too much pressure. You can advise them to get a debt review so that they may manage their repayment well.
- Have it in writing
If you have been making phone calls but there havenít been any positive results or the debtor hasnít made the payment yet, then write a letter and send. In the letter, include the number of attempts that you have made asking for payment, outstanding amount and breach of terms.
- Hire a debt collection service
When you have tried many options and the debtor hasnít made the payment, then you should consider a debt collection agency.
When there is no formal contract with the client, ensure that you have a full record of the transaction that was carried out and includes enough details to help the collection agency to recover your money.
A reliable collection agency will assist in getting all the required information before recovering the money. Debt collectors abide by ethical and professional standards when dealing with debtors and you. There are guidelines that govern debt collection. Having a debt collector ensure that the relationships are maintained and will not be affected by any process of recovering the money.
- Use legal means to deal with debtors and know the malpractice insurance
When you have tried all the options available and nothing works, then you should consider taking the debtor to a court of law where you will come to know about insurance law. You can file a case when you have exhausted all the methods of collecting the debt and you havenít succeeded. This should be the last option since you might end up paying more than what the debtor owes you.
Ensure that expectations are set and the terms are agreed up by having the customers to sign. You can effectively recover payment by using a phone. More and more calls make the customer want to pay sooner.
Always remain calm when offering your client payment options and have a record of the agreement.
Debt collection should be simple and businesses should attend to it immediately for the client to meet their obligation for the service or product that you offered. The longer it takes to repay the money, the harder it gets to recover the money.