Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
The true value of your business and the equity contained within is determined by the cold, hard facts on the balance sheet. It is not about turnover. You could have a million-dollar turnover but no actual cash flow and/or net profit.
There are exceptions of course. WhatsApp was sold for $22 Billion (US) when it was just a start up, generating a turnover of $10.2 million (US) with no profit.
However, most of my clients are SME’s or corporations that are profitable. However, they need help with accounts receivables and collecting debts.
Here are some tips for better credit management, particularly looking at your accounts receivables and potential bad debt:
1. You are Not a Bank
Companies should not be afraid to be more assertive in seeking payments from their customers – that is, after all, their part of the transaction. As long as you have upheld your end of the contract by providing the stated goods and services at the right quality and price, the consumer relationship should not be damaged when you ask for the money owed.
Keep lines of credit adequate yet low. You may not track the interest accrued on outstanding consumer balances, but you can bet that your suppliers are charging you for every day you wait on that money.
2. Follow up Regularly and Often
I always recommend setting 30-day terms or less. With today’s technology, all companies have the ability to pay within a 7-day timeframe, so 30 days, I believe, is quite generous.
After 30 days, the chances of an outstanding payment being made are significantly reduced. Business leaders and decision-makers will of course have other concerns in the meantime, but customer invoices shouldn’t be left by the wayside.
Using the telephone as the primary method of contacting consumers can arguably be more effective than email in reaching the right person. Call them frequently and on a regular basis, until payment is made. Emails can be more easily ignored, but missed calls and voicemail messages will stack up.
3. Streamline Customer Service
A happy, satisfied customer is much more likely to meet their payment obligations on time. Disputes, complaints and requests for replacements or refunds can considerably delay transactions. Having reliable, professional and effective customer service will also increase brand loyalty as the company’s positive reputation spreads.
As I have said before, I like to ring my clients each month, just to say hi and to make sure all is going well.
4. Outsource your Accounts Receivables to an Expert
As a credit manager, you need to concentrate on what you do best, which is preventing bad debt from happening. Once it’s happened, leave it to the experts to deal with and collect the debt.
Outsource your accounts receivables at the 30-day period. If you have worded your terms correctly, you can also charge your debt collection fees to your customer, so the whole debt collection process should cost you nothing.
Debt Recoveries Australia can look at your terms and we operate on a “no win-no fee” basis, so there is no cost if we are not successful. It’s a win-win scenario.
5. Seek Legal Advice
If you have done all of the above and still have outstanding debt, do not be afraid to send a strong message to your customer and issue proceedings through the court.
It is best to seek legal advice first. Most reputable debt collection agencies have an in-house legal arm that can help with this.
Here ADC Legal Litigation Lawyers, we usually give a free opinion to our clients on whether or not your case should proceed legally or not and the chances of recovery in full.
For more information on legal advice for your credit management concerns, you may contact me at ADC Legal Litigation Lawyers at 1300 799 820. You may also email firstname.lastname@example.org or Skype at adclegal.