3 Mistakes Most People Make When Collecting Debt From A Business
As we step into a hopeful new year 2021, we know that collecting debt from a business should be a top priority. When a crisis hits, cash in the bank is the most important thing for a business to consider. For this reason, particularly in the coming months of lockdown, you need to laser-focus your business priorities. If collecting debt from a business isn’t at the top of your to-do list, then you should certainly consider it in the coming weeks.
So to help you on the journey, we thought we would put together a small list of mistakes people make in this area. Particularly for business owners who believe (as they should!) that getting paid should be an automatic. We have some experience in collecting debt from a business. Some would say we are experts. Hopefully you will find this list of debt collection tips useful, and you won’t make the same mistakes!
Invoicing too late:
Many businesses try and fit their processes into their business. Often invoices will be raised at the end of the month so that a process can be established. However this is putting your cashflow at risk. Cash though the door should be your top priority. As soon as work is completed, you should send the invoice same-day. The quicker a payment cycle to you is started, the better.
Consider this. A job is completed on the 10th of the month. You raise an invoice month-end. You then allow them 30 days to pay. There is a dispute on the invoice, so it takes another 2-3 weeks to sort out. Then your client has a month-end payment run, and can’t pay you until the following month. That could be 3 months until you get paid! Make cash your priority when collecting debt from a business. Invoice quickly!
Chasing till your blue in the face
There is a certain point when collecting debts, that you need to realise your actions are getting nowehere. Many people who owe money will think of every excuse available to not-pay. Either that, or they will continue to promise the next week, then the next week, and then the next week. You have to know when to stop. Once your debtors know you will play along with excuses or unfulfilled promises, they will continue to delay payments. You need to know when to escalate it.
Give your debtors a clear timetable for payment, or demand a valid reason for non-payment. If they default on that (or simply don’t respond), then you must stick to your word on the threat of escalation. Otherwise all your credibility is lost and they will continue to string you along throughout your whole business relationship. Often clients come to us and say they have been a soft touch with their debtors. Don’t let that be you when collecting debt from a business!
Move to legal too quickly
Countless clients have contacted us saying they have spent ￡1000s on a debt collection process. Either by contacting solicitors or going to court themselves. We would always advise that you try everything before the legal process to collect a debt. A county court claim should be the absolute last resort when debt collecting. Most judges in the county court would want to know you have tried every means of debt recovery. The cost alone should discourage you from the county court.
Even without legal fees the court process can cost ￡1000s and take months to achieve a satisfactory outcome. Once you factor solicitors’ costs in the fees could easily surpass your debt total. And there is no guarantee of recovering your fees in the claim. We would always recommend looking at a trusted debt collectors agency for No Win – No fee debt collection. Often rates can be as little as 10% commission.
Collecting Debt From A Business
So there you have it, a small list of mistakes people make when dealing with debt collections.
If you are thinking of using an invoice collection service and want to find debt collectors that can be trusted, email us [email protected] or give us a call on 01332 565 350. We can provide a no obligation assessment of how we can help you with invoice recovery and debt collection rates.