In any business, any shape or size, cash flow and income can be adversely affected when a customer chooses not to pay their invoice.
This is when businesses and business owners need to be effective at debt collecting, or you must look to hire a team that is!
The good news is there are things that businesses and business owners can do to avoid commercial debt recovery. One of the largest areas is checking out your new customers.
Bringing new customers on board is a great feeling, other sales win, and a boost for your company.
However, before you and the sales team get too carried away, it’s important to know who your new customer is. Who is it that you are dealing with? Are they using a trading name, who are the directors, owners, etc.? Do you know their financial position, their reputation?
Finding out all of this information and more from the start is vital to avoid bad relationships later down the line.
It’s also vital that everyone in your business, especially your sales team, fully understands the importance of “knowing your customer.”
Debt collection tips
You must have a focused, streamlined, and effective commercial debt recovery process in place, which ideally includes:
Knowing your customer. You must know who you’re working with. Who is signing the contract for the goods and services? Is your contract with a sole trader, limited company, partnership, LLP, etc.?
Having the most up to date contact details for your customers and their accounts department. (Often, debtors will exploit these issues and inaccuracies and use them as a way to avoid payment).
Asking for proof! You can always be direct with your customers and ask them for a copy of their business letterhead, a utility bill, driving licence, passport, etc.
Carrying out credit reference checks. Checking your new customer’s credit status and payment history will provide you with an insight into whom you will be doing business with. You could also ask for references if possible.
Reviewing your orders. You must review all orders that come into the business—checking that they all have a purchase order number or that they are written on headed paper.
Getting all contracts in writing, signed and authorised by the right people. You need this information to prove the order being placed, so you also have the proof when collecting any outstanding debts.
Payment terms that are crystal clear. Providing detailed information upfront can avoid a lot of headaches in the long run. You can even include the consequences of late payment in these communications, i.e., interest, fees, debts passed to professional debt collectors, Direct Route, etc.
Offering incentives such as discounts for early payment.
Invoicing immediately after goods and services have been received. Not sending invoices promptly can give the wrong impression and almost insinuate the customer is receiving the goods and services for free!
Keeping watch. Robust credit control procedures will help you keep track of what is owed and when payments are due, scheduling regular communication and correspondence with your customers.
Keeping an eye on any unexpected changes, i.e., random or sudden changes to trading addresses, contacts within the business, volume amounts, etc.
Offering repayment options (if applicable and suitable to you). Getting part payments regularly can be better than getting nothing at all and shows you are willing to work with your customers to find a suitable solution.
Using a professional debt collector to follow up on all overdue accounts. Having a dedicated team who you can rely on to help make your life easier is essential. Taking full ownership of the process of debt collecting can help ensure that no accounts fall through the cracks.
Don’t be intimidated or embarrassed to ask for the information you need. You want to build strong, long-lasting relationships while continuing to be commercially successful in your own right.
These tips focus on helping businesses improve debt recovery, improving your chances of collecting payment, and avoiding the customer becoming a debtor.
Call Direct Route today on 0330 229 1991 or contact us via email at email@example.com and find out how we can help keep your accounts in good financial shape.
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