How Can A Small Business Collect Debt?

If you’re a small, medium or even large business in the UK, odds are you’ve come up against a late payment or two. It’s very common, particularly with SMEs, who often struggle with cash flow issues. Late payments and bad debts have always been an issue for businesses, but now with the added uncertainty of Brexit and the political landscape, they are much more of a pressing problem. And with 76% small businesses suffering cash flow problems as a result of late payments, it’s something that does need to be addressed.

Types Of Late Paying Customers

Generally, late paying customers can be split into 3 categories:

• Customers that normally pay on time, but are experiencing financial trouble at the moment and are struggling
• Customers that tend to have many payments due at once, and tend to pay them sporadically
• Customers that will go to any lengths to avoid paying, and likely never intended to pay

For most businesses, customers will fall into the first 2 categories, which are slightly easier to handle and won’t cause any long-term damage to their relationships with customers. However, there will be some that fall into that last category, and you will need a strategy to handle that. Luckily, there are a lot of different options to collecting debts, and you can choose the one that best matches your client type.

Your Options

• Avoid Harassing People Who Owe You Money: This is both a good customer service policy as well as a good legal policy when it comes to collecting debt, and should be followed regardless of the type of customer. If your actions could be considered harassing, not only will you wind up losing a customer, but you may end up facing legal challenges as well. So always be polite and professional, and never threaten or speak ill of a debtor.

• Keep Phone Calls Short: If you are communicating by phone, try to keep all calls short, on message and formal. Try to make sure the person on the other end of the call doesn’t take it personally, and don’t imply that failure to pay is a personal failure. Instead, remain calm and focus on gathering information and working your way to a solution.

• Write Letters Or Emails: Ideally, you want as much communication as possible to be in writing. This gives you a paper trail to fall back on if you do end up needing to go to court, and ensure you won’t be left in the lurch. Demand letters are often the most effective method for collecting late payments, and don’t require a lot of effort on your part. If one doesn’t work, you can send follow up letters that increase in intensity, and show you professionally attempted to recover the debt.

• Get A Collection Agency To Help: If you’re struggling to recover a longer-term debt, or you don’t want to risk damaging your relationships with your customers, then hiring a collection agency to help could be a better option for you. From writing letters and making phone calls to arranging payment plans and supporting you through court proceedings, a debt collection agency can help you follow correct processes and recover your debt successfully.

• Offer To Settle For Less Than Is Due: Speaking of payment plans, this is something that’s worth considering. If a debt has been outstanding for a while and a customer is struggling to pay it, then consider offering to settle for less than the full amount. This means you will still get paid, rather than consistently waiting on a payment that may never come. If you want to reclaim the full amount, consider offering a payment plan or instalments, so that the client stands a better chance of paying. Remember to make your settlement a legal agreement by putting it in writing and having it signed, so there is no doubt in the future.

• Take It To Small Claims Court: Of course, there is always the option of taking the debt to small claims court. This is a process in itself, and tends to only be used for larger debts, since filing a clam and appearing in court can cost more than the debt itself if you’re not careful. If you want to go down this route, we recommend you seek professional advice before you start.

If you’re trying to collect from late paying (or non-paying) customers, it can have a serious impact on your ability to do business, while eating up valuable resources and time. This is one of the reasons we suggest hiring a debt collection expert to help. Not only can we use years of experience and techniques to help recover your debt faster, but we allow you to focus on running your business, instead of constantly chasing debt. If you would like to know more, just get in touch with the team today.