Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
I love helping my clients improve their profits by collecting their debts, but I also like helping them to improve their internal procedures. Why not share the love a little eh?
So here are some tips on how you can be more proactive with your own debt collection efforts:
1. Money Upfront
If at all possible, get money upfront. Sounds simple, but most companies still give credit, since they seem to think they have to in order to win the business. Infact, it’s the opposite. By asking for money upfront, you are sending a strong message to your potential or existing customer that your products and services are worth it and that you value your products and services. If they want to do business with you, they will accept your terms. If they don’t want to pay upfront, do you even want them as a customer? Give them an incentive to pay up front. Even if you are a service-based company, you can still ask for payment upfront.
2. Strict credit policy
If you do have to give credit, then be choosy, have a strict credit application process and learn to say no when the red flags are there. Go with your gut and learn to look for signs of financial stress in potential customers. Do thorough business searches and credit reporting before doing business with your customer. Have strict payment terms and penalties for late payment and make sure you enforce them.
3. Prioritise Debt Collection
Make debt collection the first thing you do in your day, instead of the last. A simple way to start involves blocking out large chunks of time on your calendar for exclusively communicating with customers. Schedule additional time for follow-up activities to avoid interference with your collection efforts. When debt collection is made your priority, you will see the difference in cash flow and profits.
4. Ask for payment in 7 days
Most companies have payment due within 30 days. Problem is, customers aren’t silly. They figure out this implied grace period and will withhold payment as long as they can. It’s so common it even has it’s own name and it is called Payment Timing Optimization. Make your terms 7 days since most communication and payment transactions are electronic these days, so it’s quite reasonable that any company, large or small, can pay within 7 days.
5. Ask for payment BEFORE it is due
This is the secret sauce of debt collection. Surprise your customers and ask for payment before the invoice is due. Be proactive and ring them, instead of emailing. It’s a great personal touch and a great way to build rapport with your customers. Your collections team can even be trained in upselling and customer service, to provide a great overall feel-good experience, while still collecting payment!
If all this fails, outsource to a debt collection expert as soon as you can. The faster you outsource, the better the chance of recovery. Simple!
ADC Legal Litigation Lawyers is a legal practice specialising in commercial advice and litigation, debt recovery and insurance claims recovery disputes. For more information, email us at email@adclegal.com.au or call 1300 799 820. Talk to us about your litigation or dispute concerns via Skype at adclegal.