5 Ways to for Businesses to Recover Outstanding Money
Cashflow is the lifeblood of many businesses. Unpaid invoices can cause considerable problems for small business owners, holding back your ability to maintain a strong financial footing. Indeed, cashflow problems are reportedly one of the most common reasons for small businesses to fold in their first few years of operation. But what can be done about such issue?
It’s a sad reality of business that sooner or later you’re probably going to have to chase a client for payment. Appreciating this, the first step is to do your due diligence before supplying products or services to a potential new customer.
Consider investigating the company in question, looking at information on company financials, and possibly even checking out the company owners themselves. Your goal is to assess whether there is any history of non-payment before you commence a new business relationship.
Some companies also choose to include late payment clauses in their contracts, specifying what will happen in the case of late payment, and any interest that will be added to monies owed. By starting out on such a footing you immediately help to insulate yourself from a number of potential risks.
Ignored Problems Rarely Go Away
It is tempting for business owners to shy away from situations of non-payment. After all, who wants to risk losing a valued customer by chasing them for payment?
The reality is that problems very rarely solve themselves when ignored. Instead, it is better to address the subject of non-payment immediately. Under such circumstances you can not only demonstrate to your debtors that their unpaid invoices don’t go unnoticed, but the sooner you begin chasing the payment the more likely it is that the issue will be resolved.
If necessary, use a tracing agent to locate the contact details of absconded individuals, so as to ensure that business debts caused by relocation to not negatively impact your own company.
Approach Outstanding Payments Positively
It is all too easy to get frustrated when clients “overlook” your invoices. However, approaching such a situation aggressively rarely yields the desired outcome. Instead, try to consciously approach outstanding debt in a positive manner.
Try to contact your debtors to politely remind them of the outstanding invoice, and to make sure they are dealing with the situation. Approaching first contact as a gentle reminder, rather than a demand, will often yield far more positive results.
Make SMART Goals
We’ve all heard the old cliché of “the check is in the post”. Some clients, it seems, are experts of wiggling out of paying invoices. There’s always an unforeseen issue; the person you need to speak to is off sick, or the bank has had a problem, or the payment has already been sent so perhaps you should chase your bank?
If you’re not careful, weeks can roll by, as one excuse after another convinces you to wait just a little longer. The key here is to set so-called SMART goals. They should be:
In other words, press for exactly how much is going to be paid, and when you can expect the payment to be cleared. Also, try to agree a plan-of-action if such a payment is not forthcoming.
By agreeing to the specifics, rather than just generalities, you will make it much more difficult for companies owing you money to talk their way out of future non-payment.
Consider Outsourcing Credit Control
All of these steps, of course, take time and effort. This is sadly something often lacking in smaller businesses. A potentially cost-effective solution is therefore to utilize the services of an outsourced credit control firm. Such companies will chase outstanding payments on your behalf, typically taking a percentage of each payment successfully recovered.
Only you can decide whether this is cost effective. Would you rather experience a rapid inflow of cash, with the knowledge that the credit control company has taken a cut, or wait for the full amount (assuming it ever turns up?).
The key message here is that you don’t need to feel powerless about business debt. There are plenty of steps that can be taken to recover outstanding debts while still maintaining positive relationships with your customers and clients.
All it takes is a little change to your business processes to start down the route of more effective cashflow management.