Small Business Debt Collection Strategies

Good Credit Control is Essential for Cash Flow.

Contributed by Tim Levchenko-Scott of www.total-debt-solutions-new-zealand.com

If your business is selling on credit, good credit control will be essential. Cash is king in business. Cash is the oxygen of business. Without it, your business will surely fail.

There are three key elements to good credit control:

• Systems
• Persistence
• Good Communication

Systems means having a system as opposed to just reacting. Have terms and conditions clearly displayed or included in contracts. Make sure debtors know that collection costs can be added. Your system should include routine reminders, follow up phone calls and statements.

Action is the key. If you are not receiving the money due to you, do something about it. Have a prompting system to ensure all overdue accounts are followed up in a timely fashion.

Make sure it is the specific responsibility of someone in your business, and make sure that person is competent at credit control and doesn’t avoid the task.

If a debtor doesn’t respond, make sure you take further action before the debt becomes too old. In most circumstance, a 7 day letter stating that the matter will be referred to debt collection if not paid within 7 days would be appropriate once a debt is 60 days past due.

Persistence means just that...Be persistent. Don’t give up. It’s easy to be busy and not deal with problems. But if you don’t chase up debtors and collect your money you will lose money. You would have been better off not doing the work in the first place.

Finally, good communication skills are essential. Listening is important. You don’t have to be weak or sacrifice your position to listen to someone.

There may be issues which need addressing to ensure payment. Being aware of your own emotional reaction to the situation is an important communication skill too. If you choose to respond by becoming angry or allowing debtors to intimidate you by communicating like a victim, you will find it much more difficult to continue with the collection process.

Being business-like and professional is always the way to go. You need to assert your position, but if you betray strong emotions during the process you will be giving power to the other party. More small business debt collection techniques.

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