Are you tired of writing off bad debts every financial year? Large amounts of unrecoverable debts can hurt your financial position, cause cash flow problems and make it hard for your business to meet its financial obligations. Therefore, it's essential to come up with an effective debt collection strategy that will reduce bad debts while preserving the good relationship between you and your customers.
With this in mind, here are a few debt collection tips to protect your business from bad debts.
Keep Accurate Records
Accurate record-keeping and documentation is essential to avoid bad debts in your business. Document payments made by the customer (if any) and keep the receipts as proof of amounts and time of payment. If you have meetings with the customer regarding an outstanding debt, have the agreement in writing, as well.
Proper documentation can come in handy if you decide to sue your client for unpaid debt. The documents will act as evidence and also prevent the customer from reneging. As long as the customer has not been declared bankrupt, suing them can help you recover the unpaid debt.
Provide Payment Options
When dealing with outstanding debt, sticking to the payment options and terms outlined in the contract may no longer be favourable. Some debtors may genuinely be unable to adhere to these terms. As a result, they end up defaulting. To avoid such, consider flexing your payment terms and options.
Work out a plan that's favourable to both you and the customer. For example, you could agree to receive lower sums at shorter intervals as compared to asking them to pay off the entire outstanding debt. Again, put this in writing and let the client countersign. If they go back on their word, you can use the new contract to sue them in court.
Cease from anger, nasty confrontations and threats when dealing with outstanding debts. According to consumer law, a debt collector cannot use coercion, physical force or harassment to get a debtor to pay. The debtor can send a cease and desist letter to the debt collector instructing them not to get into contact with them.
Some debtors can also ignore the debt until the lapse of the statute of limitations. If this happens, you cannot collect the money or use a collection agency to do the same. Thus, try to conduct amicable negotiations with your client. Avoid manipulation, confrontations and arguments that could cause you to lose the money altogether.
Collecting outstanding debts can cause you to lose focus on core business matters. Consider hiring a collection agency that will handle the debts and protect your business from cash flow and financial problems. To learn more, contact a low-commission debt collection company.