It takes bravery and courage to be able to start your own business. You end up wearing several hats as you try your best to juggle doing your actual work to generate revenues while running all the operations on the backend.
Unfortunately, one of those operations is collecting invoices and payments from all your clients. It’s also important to remember that because you’re a sole trader, no one else will be able to help with this in the beginning.
That’s why it’s always a good idea to consider partnering up with service providers that can help set up your end-to-end sole trader invoicing as well as sole trader debt collection. This movement will ultimately allow you to not be in situations that could be uncomfortable. It’s always uncomfortable relating to money matters.
Therefore, the sooner you sign up with a debt collection agency such as Direct Route, the sooner you won’t have to worry about asking for money from clients that you’ve rightfully earned, and they are willfully not paying.
What happens if someone doesn’t pay out my invoice on time?
The first thing to do is breathe and take a moment. It’s not the end of the world, and there could be various reasons why there’s a delay with the invoice. The business you’re dealing with could pay out invoices on multiple dates, and it could be a miscommunication.
Companies also forget from time to time to pay invoices on time and will extend them until necessary. Paperwork, emails, requests can all get lost, even with follow-up emails.
That’s why it’s essential always to request and have communication and have them confirm receipt with intent to pay out the invoice. Not every situation with a delayed invoice leads to sole trader business debt accumulating. It’s not always fair, as a sole trader definitely needs consistent cash flow on a timely basis, and there could be tax implications based on paying out taxes on invoices versus on monies received.
The next step necessary is to make sure that if it looks as if the invoice is going to go into debt collection, then be prepared. Prepare in the sense that you should have all your records in order and ensure that you’ve already signed up with a commercial collection agency.
Why work with a Debt Collection Services agency?
Besides avoiding that uncomfortable situation, which is enough of a reason for sole traders, 30% of the time sole trader’s bad debt collection stops, and the collection attempts are given up. This percentage is a significant portion of small invoices that can drastically affect the future of certain businesses.
A commercial collection agency works tirelessly for results. They do this because the compensation scheme directly relates to the proportion of funds they recover from the sole trader’s significant debt. This incentive helps alleviate sole trader debt problems and gets them fully committed to generating more sales and collecting paying invoices.
It’s better to have a debt recovery agency work for you as a sole trader, so you can keep working on that ultimate goal of growing your business to the point to get it beyond a sole trader company.
Make sure to register as a Sole Trader properly
Don’t forget to take the time to fill out all the necessary paperwork and registration that might be necessary to become a Sole Trader. For example, if your business requires you to charge and collect VAT, register for VAT # as well. All of this will help you through your sole trader debt collection journey.
Keep good records of every transaction you handle in your business, from the business expenses necessary to develop your sole trader ship to vendor and supplier invoices to every single invoice you send out to collect money
It would help if you adequately created these according to the local regulations required for a domestic invoice. Make sure to have any additional information needed if you’re going to send invoices to the EU, US or somewhere else international.
Having all the proper documents and formats allows for debt collection services to be done appropriately and legally within the barriers of the law. In addition, since there’s an appropriate history to follow and track, it gives the debt recovery agency a better chance of recovering at least partially the funds owed to you, if not all the funds owed to you.
Keep in mind, as a sole trader, your ultimate aim is to keep your business constantly growing, and that might mean spending extra with third parties to maintain your accounting and collect your invoices from demanding customers.
You want to keep that growth to eventually get something that protects you personally from liability, as that will also help you in the future as your invoicing increases in volume and amount.