Bad debt is something that every business deals with. No matter what industry you’re in, you will come across a fair share of slow-paying as well as non-paying clients. The difference between success and failure when handling this issue lies in how prepared and proactive you are. Here are some simple practical tips that will help you take care of bad debts and recover your money:
- Get in the right mindset
Here at Slater Byrne Recoveries, we’ve had many clients come to us for help because they’ve suffered major losses or are on the verge of entering liquidation. More often than not, their problems stem from one thing—bad debts that have accumulated and gone unpaid for too long.When we first talk to business owners in this kind of situation, they often ask us the same questions, such as:
- “How do we make them pay?”
- “How do we stop this from happening again?”
- “At what point do we call you? How many days overdue does the debt have to be?”
- “There is no hope. The system supports the debtors.”
- “I can’t afford to do anything about it.”
- “I don’t want to use a debt collector as I don’t want to ruin our industry reputation.”
However, the simple truth is that dealing with bad debts is not necessarily hopeless or impossible. Yes, you may have suffered some losses, but it is not the end! You must get yourself in the right mindset and know that there are things you can do to recover. One you’re in a more motivated frame of mind, you can take back control of your business and formulate better plans of action.
- Reduce your financial liabilities
Now that you’re ready to get back on your feet, your first priority is to reduce your company’s bad debt and other financial liabilities. Keep in mind that the bigger the financial loss you experienced, the longer it will take for you to recover from it. You may need to work for weeks or months for nothing before your business begins to make a profit again. You will need all the cash you can get your hands on. This is where Slater Byrne Recoveries comes in. We’ll help you go through all your outstanding invoices and formulate the best plan for payment collection.And since we are a commission-based debt recovery agency, you will not have to pay our commission if we don’t recover your debt. Every dollar we get back from your debtors will help your business reduce its financial liability.
- Get to the root of the problem
When unpaid invoices accumulate and age, they seem more mysterious and complicated than they actually are. You may find yourself not wanting to deal with them because you’re afraid of what you might discover, or because you’re not quite sure how to make sense of the issue.But if you want to solve the problem of bad debt, you must try to understand its root cause. You can do this by asking the following simple questions:
- Is the debtor an individual or a company?
- Is the debtor still trading?
- What the debt is for—(product or service provided)?
- Reason for non-payment, is the debt disputed?
- How much is owed?
- How long has it been outstanding?
- How long have you been doing business with them?
- Does the debtor have a history of late payment, is this different to normal?
- Did they fill in a credit application with you?
- Did they sign a Director’s Guarantee?
The answers to these questions will help Slater Byrne decide how to best approach your bad debt. It will also help us get to know you, your customers, and the issues that you are facing in your industry.
- Don’t let too much time pass
Remember that when it comes to debt recovery, time is of the essence. A month might not seem that long, but in business 30 days is a lifetime.If a company owes you $5,000, chances are they owe another 6 companies $5,000. Every thirty days this amount will increase. Consider this an interest free loan, but at some point they are going to reach beyond their capacity to facilitate this loan. This will be the moment that the company will voluntarily enter liquidation, or will be wound up by another creditor.If you allow too much time to pass without taking action on unpaid debts, you run the risk of not getting paid at all.
If you want to know more about how to create and implement effective debt collection process, feel free to contact Liam White for a free consultation on 02 9191 4518.