The words debt collection can strike fear into the hearts of even the bravest of folks.
However, the idea of debt collection is often misunderstood. It’s not big, burly men knocking down people’s doors for cash. Rather, debt collection is simply the collection of money owed to your business.
When your business’ debt collection process is efficient and working properly, the cash flow of your business is supported, which means you have the pieces in place to ensure that your business can pay its own bills and expenses.
However, there are some common mistakes that many businesses make when it comes to their debt collection efforts.
If you want to ensure your business is in the best position possible when it comes to managing its debt collection process, keep reading!
No contracts, payment terms, trading terms or terms and conditions in place
Every business should have payment and trading terms in place. It is the first level of protection against the various issues that can transpire when you own a business.
It doesn’t matter whether you’re the only person working in a business, contract, and terms are not just for the big businesses.
These agreements lay out the terms of doing business with you and can cover all sorts of information, from how long someone has to pay their invoice to how you will provide the goods or services of your business.
Having clear trading terms and payment terms means that if a customer of yours decides to not pay for some reason, you’ve got some protection to fall back on.
The idea of contracts may be intimidating, but they will make dealing with delinquent customers a lot easier.
Making a deal before checking the details
Entering into new deals, partnerships and arrangements can be exciting and even a little bit overwhelming.
However, it can also be a costly mistake if you don’t do your due diligence.
What do we mean by due diligence? Well, we mean understanding more about the person or business you’re entering into the deal with.
A simple way to do this is by running a credit report on them. For a small fee, you can get comprehensive reporting on their credit history. And this report can highlight any of those red flags that can easily be hidden.
A credit report will essentially be a highlight reel of any discrepancies in their payment history and is the best way to understand their habits.
While it might cost a little bit of money now, it could save you from a huge headache in the future, especially if you end up having to chase them down for unpaid invoices.
Not having a debt collection process or accounts specialist in place
A mistake many small businesses make is not having a thorough process for their accounts. This includes a way to keep track of invoices, as well as how to manage the invoicing and debt collection process itself.
While you might not have run into the issue of a delinquent customer just yet, there is a high chance that you will in the future and having a proper invoicing and accounts process in place will help you manage this.
We suggest hiring a dedicated accounts receivables specialist to manage this area of your business so you can concentrate on other areas.
Not knowing when it’s time to call in the professionals
There are a lot of negative connotations and thoughts about debt collection agencies, however, working alongside one can be one of the most valuable things you do for your business.
Not only will it show your delinquent customer that you’re serious about receiving your outstanding payments, but they also offer a highly professional service that can complement your own professionalism.
In addition to enhancing your business’ own reputation, a debt collection agency has the specialised skills, expertise, and resources to be able to recover unpaid debts more efficiently than you will be able to.
It means that you don’t need to spend valuable time chasing down customers and unpaid debts, rather you can spend that time strengthening your business with new customers.
If you’re looking for debt collectors in Adelaide, or anywhere else in Australia, for your business, get in touch with JMA Credit Control.