Small-scale business owners are the most susceptible when it comes to debt collection. If not done correctly, your business might end up losing more money due to expensive legal fees or other problems that may occur during collection. Unpaid and/or uncollected payments on several transactions may become a big threat to small businesses as it can have an effect of tolling on the entire cash flow of the business.
Indeed, debt collection can be quite stressful if you don’t have a solid system in place. Knowing how to intelligently approach your clients and handle debt collection properly is imperative in ensuring that your business is able to stay afloat.
In this piece, we spoke with Scott from JMA Credit Control in Melbourne and he will be sharing with us some of the biggest debt collection mistakes by small business owners.
1. Not Doing Enough Research
Part of conducting business is making sure that you have all the data you need to protect your business interest. This is crucial in assessing potential customers and clients. As such, securing business and personal credit reports are essential in helping you gauge the right clients that will honour their contractual obligations and be spared from the parties who are likely to abscond.
Securing a copy of your prospective clients’ credit report is very important if the nature of your business accommodates credit arrangements for larger clients. The business credit report gives you a more thorough look at whether a client is eligible to receive the services you offer, including the perks and other privileges that come with your service.
2. Not Executing a Written Contract
This is one of the most common mistakes of every small business owner. Drafting documents, notarizing and executing them is part of conducting business. In order to make every transaction transparent and straightforward, every owner of business-- whether big or small- should allocate proper time and effort in executing a written contract.
Written contracts produce various benefits, such as binding both parties to honour all the contractual obligations they’ve stipulated and agreed therein. Your contract is an important document as it will be used as evidence if any conflict arises during your business transaction. It will help you in recovering unclaimed dues or fees that your clients may have already incurred.
Indeed, executing a solid contract that covers all the stipulations that both parties have agreed upon is a bullet-proof way that will help your debt collection easier. In a nutshell, the written contract will ensure that your terms and conditions are binding; it will likewise protect each parties’ interests.
3. Not Hiring A Debt Collection Agency
Pile of unpaid debts has always been part of the equation of doing and growing a business which if you don’t respond too quickly and properly could mean financial losses for your business -- which is not very good for small business owners.
Getting professional help from a debt collection agency is one of the best strategies you can resort to have a strong debt collection system in place. This will ensure that your business is in its much stronger position. Hiring a collection debt agency has its advantages, which include being able to focus on your other important duties without having to think about unpaid dues from your clients.
Indeed, this strategy has already shown to have yielded good results while saving business owners time, efforts and money that can be used to grow your business further. If you are a small business owner and you want to ensure that you have everything under control, consulting with an expert is the right way.