What’s The Most Effective Way To Collect A Debt?

Have you ever heard the saying ‘the sale isn’t complete until the cheque clears’? It’s an old business saying, but it’s just as true today as when it was first uttered. Because one thing many business owners forget is that actually receiving a payment from your customers isn’t guaranteed. And if you find yourself in the position of having to make collection calls, it can be a nerve wracking experience, especially if you want to preserve the relationship you have with your client.

But things happen. Economies shift (sometimes suddenly), people change their minds and businesses run into hardship, so the bills go unpaid. Sometimes for a little while, sometimes entirely. But you still need to collect what is owed to you, which means you need to make those uncomfortable calls. While there’s no sure-fire method to debt collection, there are some strategies you can use to make it easier to collect your money.

Know Their Credit History

This is a simple, preventative step that means you’re far less likely to experience payment problems from your customers in the future. Background credit checks should be a standard part of onboarding new customers, and it allows you to make sure you only work with customers who pay their bills on time. If you spot any red flags in their credit history, you can make a judgement call on the risk you’re taking, and potentially put systems in place to protect yourself. For example, payment upfront for all services, an adjustment to your standard credit terms, or a smaller line of credit to lower the risk you’ll be taking on. You can get credit checks done on potential clients through agencies (like us), or you can request them yourself as well.

Ask For Payment Right Away

Rather than waiting until everything is tied up to ask for payment, consider making your request at the beginning of the process. Bear in mind that this can take on many forms, including:

• Payment upfront – Where the client pays the full amount due before any work is done.
• Deposit – If the full payment is unrealistic in one go, you can request a deposit as a show of faith that the invoice will be paid. This is typically between 25% and 50%, but it can vary depending on your business.
• Invoice Quickly – If you can’t come to an agreement on payment before services are delivered, make sure your invoice is raised as soon as possible after the work is done, and that your payment terms state the invoice is to be paid in full within 30 days of receipt.

Offer Easy Payment Options

Another way to make it easier to collect payments is to make it as simple as possible for your customers to pay, this means being open to accepting multiple payment types, so that customers have no excuse not to pay your invoices. The most common methods include direct bank transfer fer, PayPal and debit/credit card payments.

This might also mean accepting partial or instalment payments. This is particularly useful if you have a client who is struggling to pay your invoices in one go. Offering flexible instalment payments shows that you care about your client and are willing to compromise, and it means you have a much higher chance of actually being paid, even if it takes slightly longer!

Communication Is Key

Good communication is absolutely essential in the debt collection process, and beforehand. Making sure both you and your customer are on the same page about what they will owe and when you expect it to be paid will avoid any misunderstandings down the line. If an invoice does become overdue, don’t jump to conclusions. Reach out to your customer and check everything’s ok, and correct any miscommunication that may have happened. More often than not an unpaid invoice can be resolved with a simple conversation, and it doesn’t have to go any further.

Of course, if you do have to take things further, it’s always good to have a professional on your side. That’s why we recommend partnering with a debt collection agency to give you the support and knowledge you need. An agency like us will often give you a level of authority that can be useful in debt collection, as well as helping you maintain a positive relationship with your customers. If you would like to find out more, just get in touch with the team at Debtcol today to arrange your free consultation.