Debt collection advice for small business

As a small business owner/manager, it’s essential that you get paid on time and if we’re honest get paid full stop. 

Late payments and refusal to pay can have disastrous consequences for small businesses who rely on regular cash flow to keep their business operating. 

Business debt collection and chasing debtors is not an area of business that all owners enjoy, and we get it; you also just don’t have the time; you have a business to run.   

Some small business owners have also admitted that they often avoid chasing debts altogether, especially if they are chasing larger companies. They find the process too much hassle, stressful, and uncomfortable. 

To help, our team has pulled together our small business debt collection advice and top tips to help business owners manage late payments and collections with ease. 

You might also like to check out our blog on How to Improve your Debt Recovery,” which covers some detailed information on how to avoid a customer becoming a debtor. 

Reasons for non-payment 

Unfortunately, non-payment of invoices is a big issue, especially for small businesses that rely on this steady income stream. 

In business, there are three main reasons why your customer has not paid….yet: 

1. The customers/business themselves face financial hardship and are struggling to pay the full amount. 

2. Your customer is purposefully holding payment back and is avoiding you at all costs. 

3.  There is a problem or complaint with the goods or service, and the customer is not happy and currently holding back full payment in dispute. 

If your customer falls into category one, it’s important to understand that this doesn’t necessarily mean they won’t pay; it just means they might not be in a position to pay the full amount now.  In these circumstances you could look into potential payment plans as an option, of course, depending on your relationship with the customer. 

If they fall into category three, this can be mostly resolved by working with the customer on fixing their problem/issue. 

However, if your client falls into the `won’t pay` category, it’s time to act. 

Advice for small business owners 

Make sure your processes, contracts, terms, etc., are clear and accurate.  Ensure everyone has the information they require, so delays in payment and late payment don’t become a problem. 

Know who you’re sending the invoice to.  If you’re working with Joe from marketing, but your invoice has to go to Sheila in accounts to be paid, make sure to send your invoice to Sheila in accounts! 

Invoices should be easy to understand.  Include details of the goods/services on the invoice, including purchase order numbers, references, etc.  You should also include all contact details, including address and contact numbers. 

Include payment due dates.  We can’t stress this enough.  People need to know what the deadline for paying you is!  Also, include all the different payment methods you accept too.  

Issue statements outlining what’s been paid, invoices outstanding, and any upcoming orders.  This allows customers to know in advance what is coming, prompting early or certainly on-time payments. 

Keep calm.  Ringing your customers to shout and scream at them or sending a confrontational email as a payment is late, very rarely works (if we’re completely honest, almost 99.9% of the time, it never works).  Try talking to your customer, highlighting the issue and the solution that you would like to see to resolve the situation. 

Keep a record of all communication.  Any emails or letters should be kept as a reference for all parties.  You can also use these communication pieces as evidence if you find yourself in the worst-case scenario, where you end up in a small claims court. 

Don’t harass customers. Make sure to schedule calls and carry out follow-ups regularly, but these calls shouldn’t take place every day and most certainly not, so they border on the lines of harassment. 

Make the call.  It is proven that phone calls are often better than emails in business debt collection because they can offer you real-time communication, and, in most cases, they can’t be ignored.   

Hire a professional commercial collection firm. If you’re still having no success and no attempt at payment has been made, hiring an experienced small business debt collection agency to collect the debt on your behalf can be the best next step. 

At Direct Route, we work with you to customise the best debt collection solutions for you. 

Transparent in our approach, we have flexible fees and pricing structures that minimise any costs to you, our client. 

Throughout the UK, we help business owners with commercial debt recovery, providing debt collection services to be proud of. 

Running a business is often hard enough; make sure you have peace of mind knowing that your debts are collected quickly and effectively. 

To find out how we can positively support your business today, call us on 0330 229 1991.