Contact: Maurice Falcetta
So you’ve put in the hard work for your client. You’ve issued the invoice. You’ve issued the Statement of Account. You’ve sent a reminder notice with one of those stamps with a smiley face asking the client to remember to pay your bill. You’ve faced reality – you have a bad debtor.
How could you have avoided this situation? Whilst it isn’t realistic to think you can entirely avoid the prospect of bad debtors, here are the TOP 5 ways to help you reduce the risk of the dreaded ‘debtors cabinet’.
- Have a signed agreement or credit application. If your client is a company, have one of the directors sign a personal guarantee.
- Don’t be afraid to ask for a deposit or money up front.
- Maintain and keep updated a list of contact details for your client, including several contact telephone and fax numbers, email addresses, physical and postal addresses. Sometimes a debtor will ‘disappear’. Having an accurate and comprehensive list of contact details increases your chances of recovering your money.
- Be pro-active about enforcing your terms of payment. Generally speaking, the older the debt, the more difficult and potentially expensive it becomes to recover the monies owed. Being pro-active includes:- Creating a disciplined internal debt recovery procedure. Ideally it should include a flag that highlights when a payment deadline has passed, and implements a ‘stop work’ notification until payments is received.- Following through with your debt recovery procedures and warnings. A recalcitrant client will be more inclined to heed the terms of payment if they know that your business means what it says about its payment terms and the consequences of not complying with those terms.
- Engage a third party to recover your outstanding debts. Often interposing a third party allows you to maintain your relationship with the customers or clients because you are directly removed from the debt recovery process. In addition, having a third party pursue your debts on your behalf means you can continue to focus on your business.