According to a report by the Small Business Administration, over 30% of invoices are paid late. This means that millions of dollars in invoices are overdue each month. Late payments can have a serious impact on businesses, especially small businesses.
When an invoice is overdue, it can put a strain on cash flow and make it difficult to pay other bills. Over time, this can lead to financial problems and even bankruptcy. Oftentimes, the mistakes that keep you from getting paid are your own. In this article, we identify what they are and how to avoid them.
1. Waiting too long to collect a debt
Late payments can damage relationships with vendors and customers. Waiting too long to collect on debt makes it that much more difficult to ever get what you’re owed. That’s why it’s important for businesses to do everything they can to encourage timely payments.
This may include offering discounts for early payment or sending reminder emails when an invoice is due. You could also consider a debt recovery service to help schedule reminder notices at regular, predictable intervals. Whatever you do, make sure you handle it in a manner that can be easily distinguished from threats or harassment.
To accomplish this, be sure to:
- Clearly and concisely state when payment is due in your invoices.
- Include late payment fees in your invoices so customers know there will be a penalty for paying late.
- Set up automated reminders to be sent a few days before the payment is due.
2. Contacting the debtor’s family or friends
You might be tempted to contact a debtor’s family or friends in an effort to get them to pay. After all, if the person owes you money, shouldn’t they be willing to help you get it back? Unfortunately, this is a bad idea for several reasons.
First of all, it’s a violation of the Fair Debt Collection Practices Act (FDCPA). This law prohibits debt collectors from using harassing or abusive tactics when trying to collect a debt. This includes contacting the debtor’s family or friends and revealing the nature of the debt.
In addition, this type of contact can be extremely upsetting and cause undue stress for the debtor’s loved ones. It’s simply not worth it to risk violating the law and causing distress just to try to collect a debt. It’s better to stick to options that are legal and respectful.
3. Failing to Document Communications
Whenever you are trying to collect money from someone, it is important to document your efforts. This documentation can be in the form of receipts, emails, or even text messages.
By documenting your attempts to collect, you will be able to show that you made a lawful effort to get the money that is rightfully yours. Additionally, if the matter ends up in court, your documentation will be essential in proving your case. Therefore, always make sure to document your communication efforts when you are trying to get those invoices caught up.
4. Seeking Legal Help Too Soon
Maybe it finally gets you paid. But it eats up valuable time and adds to your overall expenses, thus cutting into any profits along the way.
A better idea before letting it get to this point is to use debt recovery services first. Doing so will provide assistance in trying to recover the debt without going through the process of making a claim and paying exorbitant legal fees in the effort.
5. Refusing to Negotiate
There are definitely benefits to negotiating. While your sense of justice might need to be put on hold, you have to do a cost-benefit analysis sometimes on what you can realistically get versus what it will take out of you to pursue the full amount and your realistic chances of success.
Oftentimes, refusing to negotiate out of pride will keep you from getting paid. Or, it will eat up any remuneration in additional manpower and costs.
6. Ignoring the debtor’s rights
We’ve already mentioned it once: the FDCPA. This document favors the privacy and dignity of the debtor, sometimes to the detriment of those who are rightfully owed money. There are things about this that you might not find particularly fair.
That’s especially true when the debtor is willfully refusing to pay. However, trouncing on the rights afforded to him by law is a recipe for never seeing a dime for the product provided or services rendered.
Do you struggle with frustration when vendors or customers aren’t paying you? Have you had to stop yourself from being overly aggressive in pursuit of what you’re rightfully owed? Southwest Recovery Services can help. Our track record in the debt recovery space is like no other, and we’re ready to hustle for you. Contact us today to get started!