Overdue payments are a fact of life in business, and unfortunately the situation only looks like getting worse. High inflation is going to squeeze everyone’s cashflow, and even if your customers are trying their best to keep up payments, they might be chasing bad debts themselves.
So what strategies are available to you, if you want to chase money owed to you?
Using Your Customer Relations
When you have a problem with a customer, whether or not it’s money related, the first thing is to reach out through the direct relationship you have with them. Yes, you could go straight for legal action, but it’s far better to find out what’s going on. That way, if the situation can be resolved, you won’t have upset a customer who could be valuable again in the future.
Even if they’ve been ignoring your letters or email, or else making excuses, there might be a genuine underlying reason why they’re finding it difficult to pay you. Perhaps they’re in exactly the same position with their own customers, or even been the victim of fraud.
If this is the case, you may get them to discuss the problem openly, allowing you to explore whether there’s a way of coming to an arrangement. Perhaps they could pay in instalments, for instance. While not ideal, you would at least get some of your money in the short term, and all of it eventually, without having to resort to costly legal procedures.
What if No Arrangement Is Possible?
Ideally, you can come to an arrangement, but your patience shouldn’t be infinite. Perhaps you’re getting nowhere with your negotiations, or you’ve agreed on a plan the customer isn’t following. Maybe the original non-payment was due to a dispute you’ve now rectified, but payment still isn’t forthcoming.
On the other hand, you may be under pressure yourself from outside. Perhaps you owe money yourself that you can’t afford to settle without this overdue payment. Or perhaps you’re obliged to take further action by your credit insurance policy.
In any of these cases, you may need to abandon informal negotiation and take it to the next level.
Bringing in a Debt Collection Agency
The decision about when to bring in a debt collection agency can be a delicate balance. On the one hand, it can seem heavy handed if you start using an agency at a stage when there’s still a real chance of settling matters by negotiation, and this could alienate the customer. On the other hand, the longer you leave a debt, the harder it becomes to collect. In general, it tends to be easiest to collect a debt within three months of its due date.
On the other hand, a good debt collection agency, such as SJ Collections, will handle matters sensitively and not jump the gun before reasonable negotiations are exhausted. It certainly can’t hurt to talk, so if you have outstanding invoices, give me a call for a chat about the best way to proceed.