Getting paid is the only way that your business can stay operational,but collecting business debt can be harder than you might think. This means knowing how to collect the money you are owed is a vital skill to if you want success. The issue is that many business owners go about this in the wrong way. If you do not know how to collect business debts correctly,you could alienate your customers and really hurt your business.
The start of the debt collection process will be the normal invoicing to your customer. The invoice should have information about the payment period which is often 30 days. This should be agreed before you do any work with a customer,your the payment terms needing to be included on the invoice.
You will not be able to get payment of the debt if you have not provided a good invoice. Not only does the invoice need to have information about the payment terms,but it should also have a detailed breakdown of the work provided. This can be very useful in the long run.
Follow Up The Payment
If you have not been paid on time,you need to start chasing the payment. The way that you do this will depend on how you operate your business. Some people chase payment via email while others will phone the customer. Regardless of the method used,you need to be polite when you chase them about the invoice.
You should never start with an abrasive approach. This will just make the customer less likely to pay,because you have been unnecessarily aggressive to them. The emails and calls should also be kept short and spaced correctly.
Sending The Final Notice
If you have not been paid for a prolonged period of time,you will eventually have to send a final demand. This is the last item of communication before you take legal action. The notice states that the customer has until a set deadline to pay before you start pursuing court action to claim the money owed.
In many instances,a final notice will be enough to get you your money. However,if you are still not being paid and there has been no real reason for this,you will need to take legal action. It is important to note that before this stage,you should place any further work for the client on hold and not provide them with further products or services.
Taking Legal Action
There are two options when it comes to legal action and the one you choose is based on the amount due. The first option is to go through the small claims court. This option allows you to discuss matters with the customer and reach a conclusion that you are both happy with. The resolution will generally be the customer paying the debt along with interest and fees such as court dues.
The other option is to work with a debt collection agency. This can take place after the small claims court as well if the customer is not keeping to the legal decision. The agency will work as a liaison and will help enforce the court decision.
There are a few steps that you can take to collect any business debt. Chasing the debt politely is the initial step and you should only send a final notice after a prolonged period of time. Legal action is the final step to take and could lead to insolvency proceedings.
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