Unpaid debts are not only frustrating, they can seriously affect the profitability and stability of your business. With so many other pressures on you and your team, debt collection can often go on the back burner. Unfortunately, the longer you leave things, the more risk there is of a debt going bad.
If you've got the resources and expertise to chase unpaid debts effectively, that’s all well and good. However, many businesses, particularly SMEs, can only do so much in the form of credit control. Taking things to the next level doesn't just take time and effort. It's also about having the knowledge and experience to follow the right path, whether that's using a more proactive approach or escalating to legal action.
If you're struggling with a bad debt and wondering whether it's time to put it in the hands of a debt collection agency, here are a few questions to ask yourself...
Is the customer's account overdue by more than 90 days?
This should be a clear red line. Allowing an unpaid debt to cross the 90-day threshold could embolden the customer to try and get away with delaying payment even longer – or to consider not paying at all. 90 days will quickly become 120 days – and maybe more. This will not only impact on your cashflow, but could also damage your reputation.
Are you struggling to make contact with the customer?
It could be an oversight or a genuine misunderstanding. However, it could be a deliberate delaying tactic. It's also possible that they're hoping you'll simply give up and write the debt off. Whatever the reason, it's important to get in touch with them and clarify the situation. If they're experiencing cash flow problems themselves, you may be able to negotiate special payment terms or get to the front of the queue for payment when funds become available.
Has a customer's cheque failed to clear?
This is usually a clear indication that they're in serious financial difficulty and are either playing for time or using what limited funds they have to prioritise some creditors over others. It's vital to act quickly in this instance, so this could be the right time to take things to the next level by instigating legal proceedings.
Does your in-house team need support?
Your finance team may be having to focus on other priorities and credit control may be taking a back seat. You may simply have limited internal financial resources or none at all. Whichever is the case, a debt collection agency can help. And with a 'no collection, no commission' charging structure, it's an affordable option.
Are you considering writing off the debt?
This may be an easy option, but it's certainly not the best one and should be an absolute last resort. Why not let a debt collection agency try to recover the money you're rightfully owed? With no up-front cost, you've got nothing to lose.
At Redwood, we're here to help
If you've answered 'yes' to any of these questions, now's the time to talk to us. We have a proven track record of success in debt recovery and you can rely on us to act proactively but professionally, with sensitivity and due consideration for your good name and the integrity of your customer relationships.
Why not trial our service by passing over one or two overdue debts? It could be the beginning of a valuable and productive working relationship that helps you protect your cash flow and your bottom line. Our aim is simple: to help your business Grow Stronger.
