One of the biggest drains on your small businesses finances is the non-payment for goods or services. Allocating finds that could be used elsewhere in the company to adjust for non-payments of invoices can seriously impede on your profit margin.
While it is advisable to have a bad debt reserve, this should be in direct correlation to your industry and requiring a bigger fund could mean you need to reevaluate who you do business with and how you request payments for any business you do.
Chasing up bad debt from customers or companies can seem like a drawn-out process and will inevitably incur more costs to yourself, however, that should be the reason why you fail to collect the money you are owed.
People Who Owe Money
Generally, people who owe your small business money will fall into one of three categories.
- Customers who avoid paying at any costs
- Customers who pay sporadically but have a lot of payments outstanding.
- Customers experiencing financial difficulties but usually pay on time.
Chances are, your main non-payers fall mainly into the last two categories. So how do you get non-payers to pay their debt in full?
Stay Calm
Have you ever been put off doing something because of the way you were asked to do it or the tone used? This works with debtors too. The calmer and more reasonable you are the more likely they will be to repay what they owe. Responding angrily will only alienate them more.
Know Your Rights
Educate yourself on your rights when it comes to claiming back debts you are owed. Once you know where you stand legally, you can look at other forms of collection and use services available to you such as Skip Tracing to find those who owe you money and legally pursue collection.
Keep Records
Record every time you contacted them and any replies or refusals to pay you have along the process. Should you need to resort to legal routes to claim back what you are owed, this will help you to build a case.
Be Persistent but not Harass
There is a fine line between persistently contacting s customer for repayment and harassing them. Personally what feels like persistence and legal contact to you could be misconstrued by the debtor.
Avoid daily contact to request payment and instead, check-in less frequently but consistently, for example, every seven to ten days to keep in contact but not harass the debtor. This too, will help your case should further action be necessary.
Offer Discounts
Chances are, if your debtor is usually a good payer, then owing you money is just as worrying for them as it is for you. No one likes to lose money but at the same time, getting some of what you are owed back is better than nothing.
If your debt has been outstanding for a while, why not offer a discount on their bill. It may be that they can comfortably afford to pay you less and getting something back for the work or products you supplied is a better resolution than holding out for the full amount.
