Your company’s cash flow can be adversely affected when customers don’t pay the bills for products or services. There are a number of debtors who may owe your company money, and you need to be effective at collecting in order to stay in the red.
While creditors have many legal rights and can take action to collect, there are also laws restricting what you can do in order to get the money owed. This means you need to tread carefully, make smart and strategic choices, and have a streamlined and effective debt collection process in place. Here are 10 of the things our Sydney-based debt recovery lawyers recommend that your company can do now to improve the debt recovery process and get more cash coming in:
1. Pre-screen customers before extending credit
The best way to avoid delinquent debtors is to make sure you only extend credit to those who are responsible. A high credit score and a stable source of incoming funds make it much more likely that the borrower will pay you back on time.
2. Keep careful track of exactly what is owed and when credit was extended
You need to know exactly what you are owed in order to be effective at debt recovery. Have a standard system in place to record when credit is extended, the amount, and when the payments are due. You can use this system to follow up throughout the debt recovery process and make sure you are going after people who do not pay.
3. Ensure you are crystal clear on payment terms (and penalties) upfront
Sometimes, borrowers do not repay you because they didn’t fully understand the terms of their agreement with you or were not aware of the debt they were taking on. You need to provide detailed information upfront on when you expect to be paid, what the credit terms are, and what the consequences are for late payment or nonpayment.
4. Offer incentives for paying instantly or for paying early
If your company gets the money sooner, and without having to follow up, you are more likely to benefit from positive cash flow and less likely to have debt recovery problems. If you can get people to pay right away or early by offering a small discount or other incentives, any costs associated with this incentive is usually more than made up by not having to chase down payments.
5. Get everything in writing (and signed) when you extend credit
If you need to pursue legal action in order to get paid, you will want clear proof of the debt. Those who borrow or who owe your business money for services are more likely to pay on time if you can show them where they made a signed promise to do so.
6. Reach out to borrowers both before the money becomes due and when the debt must be paid
A payment reminder may be enough to get people to pay for the products or services that they owe you money for. Sometimes, nonpayment happens just because of forgetfulness or carelessness. Reaching out right before payment is due can help get the payment in on time. When the payment is late, it is a good idea to send a written request and also make verbal contact so you can start a paper trail and talk to the borrower about why payment has not yet been made.
7. Assign a dedicated debt collector to follow up on past due accounts
Having one person in charge of debt collection is going to make it a lot easier than if you divide up responsibilities. Your debt collector can take ownership of all of the steps of debt recovery and can ensure that no accounts fall through the cracks.
8. Provide options for repayment
Sometimes, people want to pay for the products or services but simply may not have all of the money available upfront. Getting payments on a payment plan can be better than not getting payments at all, so consider exploring offering flexible payment options for people who are struggling.
9. Record all attempts to collect
If you need to go to court and get help getting payments, it is helpful to show all of the different attempts you have made to try to collect on your own.
10. Cut off credit and take legal action when it becomes clear that payment is not forthcoming.
When payments are late, you don’t want to keep extending credit or providing services with expectations of future payments. Cut off access to the products or services until you are paid and consider getting legal help from a debt recovery lawyer to involve the courts in your efforts to get the money that is due.
At Owen Hodge Lawyers, our experienced debt recovery lawyers in Sydney can advise you of your rights and the legal processes and protections available for creditors who are owed money. We can also take care of all of the legal steps involved in debt collection for you, and help you to send a letter of demand or make a statutory demand. Sometimes, a letter from a lawyer is enough to get a payment made promptly.
If your demands for payment are not met, our lawyers can discuss your options for pursuing further legal action and taking your debt collection to the next level. Call today at 1800 770 780 or contact us via [email protected] to schedule a consultation and learn more about the assistance we can provide.