It seems like a no-brainer that your business needs to keep up with who its debtors are. But poor record-keeping is a reality of the business world, and it can really come back to haunt you when it’s time to collect on payments due.
In fact, one study found that one in 10 payments of the $3 trillion owed globally is received late. And while your numbers may be lower than 10 percent, chances are good that you’re owed at least some money by customers or clients who haven’t paid up yet.
Allowing them to slip through the cracks will ensure you stay behind the 8-ball. In this article, we’ll be looking at some ways to ensure that you’re getting paid what you’re owed.
Businesses should keep track of their debtors for a few reasons. A debtor who does not pay their bills causes your business to lose money. If too many bills go unpaid, it can start to affect your business’s credit score and reputation as you find it more difficult to pay vendors on time yourself.
Bad credit can make it more difficult to get loans should you need them. You also may have to incur costly legal fees by taking your debtors to court, thus cutting into any profitability.
There are a few ways to keep track of debtors. Businesses can use software programs that track them. This can be costly and require specialized training. (One more responsibility for your staff to take on, too!)
You can do it by hand through a proprietary system that only you know about. That could come courtesy of your IT department or through traditional programs like Excel. Either way, it’s a little more labor-intensive than you probably want, and it takes your focus away from providing a quality product or service.
Perhaps a more affordable option to consider, with less heavy lifting, is contracting with a debt recovery service like Southwest Recovery Services. One of the first tasks we’ll take on when working with your business is to dig into the books to see how many outstanding invoices you have before devising a systematic plan for collection.
Use Debtor Psychology to Your Advantage
When a debtor is past due on an invoice, it can be helpful to understand how their mind works in order to more easily collect the unpaid amount. Debtors may rationalize their late payment by telling themselves that the creditor is a large company and can afford to wait, or that the amount is small and not worth chasing after.
They may also try to forget about the invoice altogether, in the hope that it will simply go away. However, as a creditor, you know that invoices must be paid in a timely manner in order to keep your business running smoothly.
By understanding the debtor’s mindset, you can be better equipped to collect late invoices. If a debtor cites affordability as an issue, you could offer a payment plan that spreads out the cost over time. If they are trying to forget about the invoice, sending reminders on a regular basis can help to keep the debt top of mind.
Furthermore, attempting to empathize with the debtor’s position can lessen the tension that might otherwise send them into the proverbial bunker. In other words, taking the time to understand how a debtor thinks can increase your chances of successfully collecting on an unpaid invoice.
Practical Tips for Collecting a Debt
There are a few things you can do to collect a debt when the debtor is acting in a way that is advantageous to you. First, make sure you are familiar with the laws in your state regarding debt collection. This will help you understand your rights and the debtor’s rights as well.
Also, keep a friendly but professional tone when speaking to the debtor. Be assertive but not aggressive, and try to work out a payment plan that is reasonable for both parties. If the debtor refuses to cooperate, you may need to take more drastic measures such as hiring a collection agency or filing a lawsuit.
If you are having trouble collecting a debt, there are a few resources that can help you. The Federal Trade Commission has a website with information on debt collection, and the National Consumer Law Center also has resources available. You can also contact your state’s attorney general’s office for more information.
Do you need to get a handle on your unpaid invoices? Are you tired of getting side-tracked from your passion to ensure that your debtors are treating you fairly? Southwest Recovery Services has many years of experience getting into the mind of the debtor and devising strategies to get you paid quickly. Contact us today if you could benefit from an affordable debt recovery solution.