Small business debt collection tips for 2019

Small business debt collection tips for 2019

It is the business’ responsibility to contact a client once an invoice has been issued but not paid. There may be genuine reasons for the debtor not to pay but by getting in contact it shows the client that the collection team is on the ball and will chase the overdue invoice until the payment is settled. To avoid receivables in the first place or increase the chance of recovering them before having to engage a debt collection service, here are some tips for small businesses to manage those delinquent accounts.

  1. Before going into business with a new customer, one of the easiest things to do to limit the risk of overdue accounts is to run a credit check on them that includes banking data, media sources, bankruptcy filings, lawsuits and their judgement. Any small business, which is planning to sign a big deal, is advised to run trade and reference checks to find out how the potential client has maintained their accounts in the past to be able to identify red flags.
  2. Every collection process begins with a well-thought-out and detailed credit policy. Before getting into any collaboration with a new customer, terms and conditions, requirements for extending credit and the actions taken if an account becomes delinquent should be clearly laid out and signed by both parties before closing any deal. Furthermore, it is essential that all sales and service personnel is acquainted with the policy to be able to explain the policy to new clients.
  3. Invoices that hold all the information necessary for the customer to pay will definitely promote payment. To make the invoice recognizable, a business should always use the same format for the customer to find essential information. Such invoice includes the business address’ details, payment order number, date it was issued, clear description of services or products delivered including the date, plus the total amount due including tax – if applicable charges per unit. Statistics show that customers tend to pay on time when a specific due date is included on the invoice such as “payment due within 14 days” or “due upon receipt”.
  4. To help avoid delinquencies, the in-house collection team should always follow up on invoices before they become due to remind of payment deadlines. A reminder of payment can be sent out by email or made by a phone call shortly before the due date. By getting in touch with the client, the finance team can not only take the opportunity to remind the debtor of terms and due date but also ask if everything arrived on time or whether there were any issues or questions and if the invoice is clear and accurate for complete customer service.
  5. In order to keep up with managing account receivables, it is very important to keep a record of customer’s paying accounts to be able to assign a risk classification and help prioritize collection efforts. New customers with slow paying accounts are definitely a higher risk than those, a business has a long-term history with and which are normally paying 30 days past due.
  6. As accounts receivables are especially threatening for small businesses to keep them fully operating, it is important to develop an in-house collection plan that can be applied for different levels of risk. A collection plan that is accessible to all the staff and provides templates for written and oral communication or talking points for contact in person creates consistency in collecting efforts. Furthermore, being prepared will make debt collection less stressful and more effective.
  7. A reminder letter should be sent out immediately one day after the payment is past due date to simply bring the debt to the customers’ attention with a non-threatening reminder. The tone of your first debt collection reminder letter should be neutral if not with a positive and helpful tone. More forceful letters should only be sent at later stages of non-payment and the wording more direct and assertive but never offensive or unprofessional.
  8. When managing and collecting accounts, implementing a credit policy and invoice template are basics. However, as time and human resources are often limited, any small business should consider hiring a debt collector once accounts are 90 days past due date. A professional will not only have the knowledge and skills to communicate with the debtor in a stern way but is usually able to retrieve accounts receivables in a timely and efficient manner.


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B2B Debt Collection

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