We’re all guilty of making new year resolutions that we’re unlikely to keep. However, when it’s a new financial year, making yourself a promise to tidy up those loose ends in your accounts and address any systematic issues can be vital to the future success of your business.
It’s not just about following up on any overdue debts that you’re carrying over into the new tax year; it’s also about taking a good look at your credit control processes. By putting in place robust procedures, you can reduce the risk of debtors failing to pay on time.
We’ve put together some simple tips for strengthening your debt recovery processes:
Get the basics right
Unfortunately, there are many businesses - particularly SMEs - that simply don’t have any formal credit control processes in place. They may follow up with ad hoc emails or telephone calls if time allows, but that’s as far as it goes.
Having clearly defined processes can greatly improve your chances of getting paid on time. That means putting in place a few simple protocols, such as scheduling a weekly review of overdue accounts and having standard chasing letters or emails. It’s also important to review your processes to ensure they comply with any changes in legislation or regulatory standards.
Do your research
Winning new business always feels good. However, it’s not always wise to offer a new customer credit terms straight away. A simple credit check will reveal any major risks, for example their payment record and whether or not they’re financially stable. If you have any doubts, why not ask the customer for up-front payment until you have an established trading relationship?
Tighten up your terms of business
It’s vital to have a clear and comprehensive terms of business document to send to new customers. It should include when you expect the customer to pay your invoices, what will happen if they don’t pay on time and how you’ll deal with any disputes that may arise.
Communicate effectively
The first priority in good communication is to ensure you have accurate contact information for the key decision maker. It’s also important to act fast. The sooner you contact a customer about an overdue debt, the more likely it is that you’ll achieve a successful resolution.
Use every available form of communication: letter, email, call, messaging and maybe even a personal visit. And be persistent. If you don’t get an initial response, make sure you follow up. Your letter might simply be sitting in an in-tray or your email may have gone straight to a junk folder.
Be flexible
If a debtor is experiencing temporary cash flow problems, why not try to negotiate staged payments? Or at least a good will payment and a promise to pay the balance by a specified date? It’s better to get at least some of what you’re owed, rather than write the debt off.
Know your legal options
Taking legal action should always be a last resort in debt collection. However, it makes sense to know what legal routes are available to you. The threat of taking a customer to court may be enough to persuade them to pay what they owe you.
Get expert help
Have you done everything you can to recover a debt? Maybe you simply don’t have the time or resources to deal with credit control effectively? If so, it could be time to bring in the professionals. The new tax year is the perfect time to consider getting expert help with debt recovery and ensuring the financial stability of your business.
At Redwood Collections, we offer a comprehensive debt collection service, from dealing with one-off debts to managing your debt recovery processes for you. If you need to take things to the next level and legal action seems to be the only course of action available to you, we can help you through that process, providing reliable, authoritative advice and support.
Now’s the time to get your debt recovery processes fit for the future and make sure your business can Grow Stronger.
