Business owners! If you are in a world of pain when it comes to debt recovery, then this is a must-read. It’s time to turn things around and discover a less painful approach to the world of debt recovery – a topic that can be a bit daunting, but fear not, we’ve got your back!

When it comes to making sure your hard-earned money doesn’t get stuck in the land of unpaid invoices, prevention and action is the name of the game. So, let’s take a look at some top tips to keep your cash flow healthy and your debt recovery efforts to a minimum.

Pre-Sale: Lay the Foundation for a Smooth Transaction

Before you even make that sale, it’s crucial to lay a solid foundation for the transaction. Here are some tips to consider:

  • Thoroughly Vet Your Customers: It’s essential to know who you’re dealing with. For new customers, conduct background checks –  on social media, or get their accounts from Companies House, and ask for references. You can even ask for then to send you a copy of their latest management figures – a balance sheet is often enough to see if they are financially secure. For bigger customers, I would recommend proper credit checks via Credit Safe or a similar organisation. Remember, there is never a guarantee, so go with your gut instincts too on this.
  • Set Clear Payment Terms: Don’t leave any room for ambiguity. Outline your payment terms clearly in your contracts and agreements. Specify the due date, payment methods, and put in a clause for late payments fees, e.g. 5% interest per month. If they question this, just ask if they intend to pay you late – if not, it won’t impact on them!

After Sale: Keep the Momentum Going

Congratulations on making that sale! But your work doesn’t end there. After the sale is when the real debt recovery magic happens. Here are some tips to keep the momentum going:

  • Prompt Invoicing: Don’t procrastinate on sending out invoices. The sooner your clients receive them, the sooner they can pay you. Whenever possible, send them before the end of the month. Many people pay at the end of the following month, and this can add 30 days to invoices sent on 1st of the month.
  • Friendly Reminders & Statements: Send out friendly reminders before the payment is due. This will prevent hold ups later if the invoice has been lost or any invoice details are not correct. Ensure you also send regular account statements to ensure your customers don’t forget what they owe you.
  • Regular Communication: Building a good relationship with your clients goes a long way, not only for securing more sales, but also to get early wind of any problems. If you hear of any issues that could impact on their ability to pay, you need to act quickly to get your money first.
  • Offer Incentives: if you need the cash quickly, consider offering discounts for early payments. It can be a win-win situation – your clients save money, and you get your cash faster. Just make sure you don’t give your profit away or have cheaper forms of financing available.
  • Automate & Delegate: Invest in accounting software that can send out invoices and reminders automatically and delegate the activity so somebody who you know will focus on the task in hand. Remember this is your money your customer has hold of, so treat it that way.

Post Payment Date: Handling Late Payments Like a Pro

Uh-oh, the payment date has come and gone, but your money is still MIA. Don’t panic; there are steps you can take:

  • Turn Up the Heat: He who shouts loudest gets paid first. It is rarely the case that your customer can’t pay you – they just choose to pay somebody else before you. If you keep on at them, they will pay you just to get rid of the irritation!
  • Stay Professional: Even if you’re frustrated, always maintain a professional tone. Losing your cool won’t help the situation. Debt collection is a process, just trust your process. Keep  notes of when you have called and what was said.
  • Late Payment Penalties: If you set up late payment clauses in your terms, you must now enforce them. Send that late payment interest invoice and sit back and wait for the irate call.  Of course you can cancel the interest invoice it when they do pay, but if they feel the debt is getting bigger, it is normally not long before they cough up.
  • Bring in the professionals: Have on hand a professional debt collection firm or solicitor. Once instructed by you, they can claim their costs on top of your Invoice, so their service can be free. This will show your customer you are no pushover, and they should pay you. Collection agents also have the skills to take the debt all the way to court, but if you act quickly enough this is rarely needed.

Remember, debt recovery is not about being aggressive but about finding a balance between maintaining good client relationships and protecting your business interests. By following these top tips, you’ll be better equipped to tackle debt recovery like a pro, and keep your business thriving.

Happy recovering, and here’s to a prosperous future for your business! 🚀