Here Is How Your Small Business Can Recover Debt
Categorised in: Our Blog
With decades of experience as a debt collection agency, at Summit A*R we know that for a small business, collecting debt can be a frustrating process. For one, you may not have an in-house collections department. For the other, you may not have the time to follow up on a delinquent account when you’re busy running your operation. What’s more, as a small business owner you may not have the aptitude for debt collection.
We understand your concerns. You want to avoid alienating valuable business relationships as a small enterprise that thrives on goodwill in the business community. When following up on late payments, you want to be diplomatic. At the same time, you may not have the same resources as a larger organization to sustain your operation with negative cash flow.
Here are some tips on how to recover your debt as a small business:
1. Don’t Harass Your Debtor
Your customer hasn’t followed through on their promises and your own bills are accumulating — and it’s affecting business. But the worst thing you can do is harass your debtor.
Always remain professional when contacting your customer. If your actions are considered harassment, then it may dent your reputation. What’s more, your customer may take legal action against you.
Unlike other debt collection agencies that may threaten, abuse or harass a debtor, at Summit A*R we treat all accounts with dignity and respect. We take a stern yet diplomatic approach and call this our
“P.H.D. Philosophy” (Preserve Human Dignity). This is ethical and good for business. From our experience, most people want to pay their debts. And when they’re treated humanely, they’re more likely to pay what they owe.
2. Avoid Long Phone Calls
While calling your customer can certainly help you get paid, doing so every day can be counterproductive. Follow through on the phone if a deadline has passed. Moreover, keep the call professional and to the point. Calmly make it clear that the payment is past due and needs to be paid. At the same time, avoid making personal comments, which may worsen the situation.
3. Send E-Mails
Feel free to follow up on email. But like the phone call, keep it professional and to the point. Avoid the temptation of sending multiple emails and await a reply patiently. E-mails are important because they automatically document all correspondence between you and your debtor.
4. Send a Registered Letter
Alongside emails and phone calls, you can send a demand letter to your debtor. If the letter is certified, you’ll have proof that the message was delivered. Keep a copy of the letter for your records. It may come in handy should the situation escalate.
5. Consider Settling
It’s a good sign if your debtor is still communicating with you. This means that they want to pay. Do your research. If their reputation is taking a hit, then it may be a good idea to act fast. If you can afford it, offer to break the debt into installments. Alternatively, offer to settle for less than what they owe. Remember to make the settlement official by agreeing to the terms on a legal document.
6. Partner with a Good Debt Collection Agency
There’s a misconception that only big businesses require debt collection agencies. On the contrary, a small business may have a greater need for a debt collector. Unlike large businesses, small businesses operate on a lower scale and often don’t have the resources to write off bad debt.
For example, many small businesses have the capacity to serve only a few clients. And if a major client suddenly refuses to pay, the small business owner can run quickly run into financial problems. Learn about how a small business can use a collection agency to recover its revenue from a delinquent customer.
Many people run small scale operations. This can include owner-operated trucking companies, landscaping firms, hair salons, home maintenance companies and more. Small scale operations also include freelancers, such as writers, artists, musicians and others.
We believe that no business is too small to need debt collection assistance. Because we understand the cashflow limitations of small businesses, we work on a contingency basis. Our fees are transparent, up front, and reasonable. What’s more, we don’t have minimums. Your small business doesn’t have to guarantee us a certain number of accounts to partner with us.
Our methods work. Our recovery rate is in many cases twice the industry average. Sometimes, all it takes is a strongly worded demand letter written by us to your debtor.
7. Consider Legal Action
If you’re tired of chasing your valuable delinquent account, then consider taking legal action. Of course, this can be an expensive and time-consuming process. At Summit A*R we offer full litigation services backed by a professional and skilled legal team. We can do a cost-benefit analysis of pursuing your delinquent account in court. If it’s feasible to take legal action, we can do so with your permission.
8. Take Preventative Action
We understand that small business owners must sometimes take leaps of faith when working with others. However, you can minimize your risks by taking the following measures:
- Use accounting software to streamline your invoices. Ambiguities in invoices can be exploited or result in delayed payments.
- Offer multiple payment options, from checks to PayPal to make it easy for your customers
- Incentivize early payments by offering bonuses. You can also charge late fees for past-due payments.
- Don’t offer credit to every new customer. Examine their cash flow statements, debt structure, and balance sheets to tighten your credit approval process.
- Ask for references. Most small businesses are proud of their relationships. If a customer refuses to share references, then refuse to work with them.
- Insist on a contract. Avoid working with old-school businesses that still believe in handshake-agreements. Life is unpredictable and a contract will protect you.
By following these steps as a small business, you can minimize your chances of running into bad debt. Remember, partner with a professional debt collection agency like ours when in doubt. It’s best to reach out to us early because debt becomes more irrecoverable with time.
However, we do have the resources to chase bad debt. If you’re asking yourself, what is a commercial collections agency going to do to recover my hard-to-recover debt, then get in touch. We have an outstanding skip tracing department led by an excellent private investigator. If your debtor has skipped town, we have the skills and resources to trace them and their assets. Contact us to learn more today.