When you first send out an invoice to a customer, the last thing on your mind is debt recovery and what you will do to collect it. In fact, as a small business, debt recovery is probably the most important thing you should consider, and can often be the difference between a long and successful business, and a very short-lived, insolvent one.
The key to debt recovery for small business is really to have a very simple system in place for when things go bad. After all, plenty of customers will pay on time, or certainly within an acceptable timeframe for your cashflow to be sustainable and healthy. So you need to prepare for the worst case scenario for the small percent that don’t pay on time.
Timing is everything
So our advice would be for you to consider a credit policy for your small business if you are going to be successful! Luckily for you, we have put together 3 top tips to keep your small business on top of debt recovery and prosper in 2020:
- Be organised – make sure, once the invoice is sent that you are keeping track of it! Monitor the time it takes for the invoice to become outstanding. In the industry this is called DSO (Days Sales Outstanding). Once an invoice hits 30 days, you should start increasing the chasing of the invoice. Then if after 45 days the invoice is still not paid, you should send a 7-day letter. This is the final demand which can often do the trick.
- Be clear – even before you do business with a customer, emphasise the need for timely payment. Mention it in your telephone conversations. Mention it in your email to them when you send them the invoice. And put it in BIG BOLD letters on your invoices. This just makes you look like a well-oiled operation and actually can improve your customers first impression – which is a good thing! This pre-emptive action reduces the chance of your company every having to think about small business for debt recovery. Trust us, this one tip alone will help you get paid on-time!
- Be determined – if a customer is clearly paying you late and is just fobbing you off with excuse after excuse about why they cannot pay, or keep promising payment and it never materialises, then don’t just accept that situation. You need to follow-through on threats when it comes to debt recovery. At this point you should look at speaking to a 3rd party collection agency to assist you in collecting the invoice.
Debt recovery for small business
You want to avoid bad debt at all costs, and timely collection of invoices is the key to avoiding that. Companies can go bust in a very short space of time and it is essential to be at the top of the payment-pile if you are thinking of debt recovery for small business.
We would always recommend attempting to collect debts before the court stage as this should be a last resort, in most cases the debt can be collected by a collection agency on a contingency basis (No Win No Fee) which means you only pay a small % commission on success, which is a no-risk proposition for you and your small business!
If you are struggling with debt recovery for small business and are wondering how to find trusted debt collectors, please don’t hesitate to email us firstname.lastname@example.org or give us a call on 01332 565 350 for a no obligation assessment of how we can help you improve your debt recovery rates.