Express Debt Collection

OK, I am in the murky world of collecting money and I can exclusively reveal that many businesses both large and small are owed money. Really? I hear you ask. Glad you came? OK, it’s not that incisive. Lets face it, unless a business operates on a strictly cash on delivery basis, its bound to have money tied up on the debtors ledger. I have no idea of the ratio, so let’s make it up. Let’s say that 82% of companies send out invoices and give credit. If we say it enough times, it’s bound to become the accepted figure quoted by various banks and other financial institutions across the world. Like the fact that 26 is the national average scored with three darts, which must be true. Anyway, enough of that. Suffice to say, the vast majority of businesses give credit. My experience tells me that an even bigger majority of these could/should improve their collection performance. This is especially relevant with new companies as they tend to be either too scared to offend precious clients or too protective towards their income to seek help from a 3rd party. This is not helped by an apparent lack of knowledge of what 3rd parties actually do. Here’s a comment that may make you sit up.
COLLECTING MONEY IS EASY&quot
That statement is true with one postscript as long as you have a structured system for aged debtors in place. Quite simply, implementing a process for collecting your invoices that includes utilising a 3rd party at an agreed point will ensure you can concentrate on other core areas of your business. Internal systems should include (at the very least) the following:
Credit Check for all new clients (price appx £25)
Notice period for disputes
Ownership of product
Statutory Interest
Procedure for late/non-payment
These terms seem obvious and should quite rightly be a matter of course. However, at our agency in London, we get many cases every week were all or most of these haven’t been implemented. Further to that, the debtors in most cases know that they ultimately hold all the aces and will end up paying when they want to, not when you need them to. Reasons like: It was a big Blue Chip. They have done business with us for ages. It was a big order, so we didn’t want to jeopardise it, or It was only a small order, should be immediately banned as any justification for not operating sound business practises.
I cover the area of 3rd options in another article (Read Here) but there should be a point in the age of a debt when it is passed to professionals. As a rule of thumb, six months is too long. Remember, every invoice that exceeds your credit terms has a negative impact on your company’s profitability. Very often these are hidden costs which organisations often wrongly consider to be part of running a business. This fact is undeniable;
Bad Cash-flow can kill
To clarify, implement 3rd party involvement at a specific age of every invoice. As long as you have vetted the agency, negotiated good rates and just as importantly discussed your business (clients, products, service, ethos etc. Any 3rd party who don’t ask about you, should be avoided) you should ensure optimum credit control. All businesses will suffer from bad debt at some point. It’s a fact that some businesses go under and some are even out to steal from you from the beginning. However, these are very rare and as long as you implement the procedures outlined above, you will dramatically reduce your exposure to slow/bad debt.