Some common debt recovery strategies

Unpaid invoices are something every business owner fears, as bad debt creates negative cash flow, which not only affects the business’ performance but also keeps it from thriving. Chasing account receivables can have a negative impact on customer relationships and is furthermore a time-consuming job that often puts great strain on the finance department if the payment cannot be secured within days after due date. To be able to concentrate on growing the business rather than chasing debts, the best way to avoid it is to have good procedures in place once a customer falls behind payment. Especially small businesses benefit from a methodical approach towards debt collection and it is, therefore, advisable for the in-house collection department to closely monitor account receivables and know exactly when follow up needs to occur. To avoid bad debt, there are common debt recovery strategies to protect a business from outstanding amounts in the first place.

1. Before settling a deal with a client, it is helpful to let them sign a credit and collection policy that tells them all about your process for extending credit, its limit and how your business pursues past-due accounts. Your in-house collection team should be familiar with all terms of the credit and collection policy to simplify the collection effort and to have a schedule ready how and when to contact customers who are behind.
2. It is inevitable for the finance department to always use the same template when sending out invoices. When sending out invoices, consider including payment terms to let your customer know you expect to get paid on time. A consistent and systematic system can help manage accounts receivables to focus better on getting paid.
3. A lot of Australian businesses invest in accounting software to monitor their accounts receivables closely. Using such software makes it easier to check payment habits from regular customers, as the system allows accurate and timely records of payment histories and patterns. Your finance department can then track slow payments easily and react early.
4. Debt collection can be a tiring and stressful job since continually negotiating for payment can be frustrating. To avoid your in-house collection team get tired of their jobs, support them by offering regular on-site training to operate in a confident and effective manner.
5. Clear guidelines on when a delinquent customer is supposed to be contacted will help your collection team with the process of follow ups. To resolve claims quickly, it is advisable to schedule a call already the day after a customer is past due date. Trying to get in contact with the debtor early is a common debt recovery strategy as it can sometimes take several attempts to get hold of the person in charge.

Unfortunately, not every past-due account will be possible for your collection staff to recover. Always remember, if an invoice has not been paid within a period of 90 days even though your staff has been making phone calls and sending out reminder letters to that debtor already, it will get much harder to collect the retrievable and the in-house collection effort drops by 80%. If your finance department senses that settling outstanding payments might be unsuccessful with a special client, do not wait for the 90 days period to be but hire a third party influencer. Make it a custom to engage a professional debt collection agency to act on your behalf and help you secure payment. Such experts have the tools and experience to resolve objections, furthermore, outsourcing accounts receivables early will give your finance team the opportunity to take care of more important tasks such as the daily operation of your business.

Read Also:

• At What Point In Setting Up A Business Should You Seek Advice On Debt Collection?
• Consequence of Neglecting Debt Recovery