Taking care of business
debt collection and recovery Getting paid is one of the key challenges facing many small businesses. Debt collection is a necessary evil and following up unpaid and outstanding payments from customers can be time consuming and uncomfortable. Having processes and procedures in place will help you avoid debt and help you collect your cash when clients fall behind. An efficient process is also essential to make sure you don’t spend too much time chasing after unpaid invoices. Here are some helpful strategies to help make debt collection a little easier in your business.
Be clear about your pricing Ensure your clients understand the price of your service and what is and is not included in the quote. Never assume they know how you operate, ideally you should have a contract that clients sign before work commences. A contract provides clarity for both you and the client and can reduce the likelihood of disputes arising around payment and costs.
Invoice: correctly and on time Make sure your invoices do their job. It should be clear to your client how much they owe you, how to pay and when payment is due.
Debt recovery process While the steps above should help you avoid debt, if you are still struggling to get payment, the following process can help you get your cash. If a client hasn’t paid your invoice and you have chased them up, you can inform them that until the upaid account is settled you won’t be able to do any more work for them.
Friendly reminder Once payment is overdue, give customers a friendly reminder via a phone call or an email. Remind them that payment is due and has not been received and inform them that until the unpaid account is paid no further work will be completed. Ask when they will be making a payment and keep a record of the conversation (or email). Remember to be polite, they may have genuinely forgotten or paid into the wrong account!
Direct contact If there still isn’t a response, consider visiting the customer in person (or phone if previous contact has been via email) to ask for payment. This sometimes helps create a personal relationship with the customer that can be useful for future payments.
Formal letter of demand In the event that all attempts at contact have failed, consider sending a letter of demand. This is generally done as a last resort as it can damage your relationship with your client. If you still haven’t been paid then you should consider using a debt collection agency to collect the outstanding funds from your customer. A debt collector can help you draft final notice letters or can send solicitor’s letter on your behalf – a very effective alternative to legal action.
Send your invoices out as quickly as possible, the sooner the client gets it, the sooner it will fall due, then you can get paid and your cash flow won’t suffer. There are a number of cost effective software packages that can help streamline this process for you.
Overdue reminder
Need more help?
If the customer does not respond to your phone call or email, the next step is an overdue reminder. If your customer is a business, try contacting someone else in the business and let them know who you want to speak to.
The following websites have resources, templates and tips that can help you with your business.
Terms of payment
Final notice
Think carefully about your payment terms and what works best for you. Sending a clear message about when and how you expect to be paid will help you manage cashflow and customer relationships.
When the customer has not paid as per the terms and conditions agreed upon, it’s time to give them a final phone call or email to let them know you haven’t received payment.
Things to consider when setting payment terms include: types of payment; credit limits; early payment schemes; legal requirements; customer credit worthiness.
42 | Australian Plumbing Industry Magazine | September 2013
plumber.com.au business.vic.gov.au (VIC) business.qld.gov.au (QLD) business.nsw.gov.au (NSW) business.tas.gov.au (TAS) business.nt.gov.au (NT) sa.gov.au/subject/business (SA) smallbusiness.wa.gov.au (WA)