12 Oct GUEST BLOG – Debt Recovery – It is not an exact science, but we are here to help!
Directory Member: EC Credit Control
One of the biggest issues with my clients is managing their outstanding debt. It can be due to complacency, or fear of loosing client… or upsetting a business relationship, I would like to address this.
A sale, or job completed is only worth what you invoice the client for. If this invoice is not paid, it creates a lot of possible issues down the track, and therefore not a sale.
This may seem simple and obvious, BUT… there are two types of debtors…there are ones who can pay, and those that can’t.
Ones who can pay but stall, give excuses, are a challenge. They involve many hours and much effort to get them to pay, and when they finally do pay, the circle starts all over again.
Then you have ones that can’t or won’t pay… very different.
It depends on your businesses Terms and Conditions of Trade, and relevant signed documentation that has been agreed to between you and the customer.
The longer you leave an outstanding debt prior to referral for debt collection the lower your chance of recovery, this is a fact.
The longer you sit on a debt prior to referral to EC Credit Control for Debt Recovery the bigger the problem of getting paid. Your customer is of the belief they do not need to pay, which greatly exposes your cash flow, but with pressure to pay from EC Credit Control, they may have been able to do so. But as in such cases, other businesses are seeking funds off them as well, and you have lost the opportunity of getting paid to another business that was paid. Their financial situation has now worsened, and you do not get paid, a big mistake.
Accounts your clients will pay first are the most pressing debts, that’s a given. It can be that terms and conditions of trade that allow for you to penalise the client for slow payment, and you are able to put them on COD until the account is paid.. It could be that they need your particular skill set, or it could be that you are in fore front of mind due to follow up and communication. These are all important points!
Addressing the types of debtors, ones who can and ones who can’t pay.
Ones who can but stall, make sure your terms and conditions of trade are in place, compliant and signed, as this will assist in the power you have over you debtors/clients. Do not delay in referring to EC Credit Control for further action. As I stated earlier, the longer you wait the less your percentage chance of recovery is.
Ones that can’t pay… it probably means that you are dealing with a company/business that has limited funds, are expert debtors or are trading insolvent. They may in fact be trying to trade out of this and are using your money to do so. Payment plans signed by both parties is a great way to establish preference… it is physiological, but it works, EC Credit in-fact have a form that we can share at no cost with our clients just for this purpose. But if this does not result in an outcome that is positive, please refer to below.
My guidelines for referring debt for collection are based on many years experience, and are based around your clients/debtors not communicating or making broken promises repeatedly. Or excuses that you, as the supplier know are not valid.
If you are operating on 7 day terms… you should refer the debt for collection at 45 days
If you are operating on 30 day terms… you should refer the debt for collection at 75 days.
Legally binding Terms and Conditions of Trade are a necessity for all business to survive, prosper and grow. For, if there is nothing in writing, there is no proof.
Vanessa Graydon, 0402 772 922
EC Credit Control, [email protected]