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How to Maintain a Business Relationship
and Recover Debts

Small business debt collection tips and approaches

Having debtors who are late with or avoid paying their debts to you can make your company slip into a financial liquidity (or cash flow) crisis. Whatever their financial situation is, you need those funds paid to you, because the problems that uncollected debts may inflict can lead into bankruptcy.

Business relationships have their ups and downs
Even good business relationships can have their ups and downs and should be maintained
even when debts need to be recovered.

Why people avoid paying their debts?
The first (and obvious) reason is that they have no money. Also, they may have prioritized creditor over you or simply don’t want to pay.

Why people avoid collecting debts?
Usually it happens because they put debtor problems on the side, believing that they will pay them out sooner or later. On the other hand, the act of demanding their money back is unpleasant for certain people.

Business Debt Collection Tips

The fact is that it is your money, so don’t delay recovering those debts. Do not avoid contacting your debtors, focus on the delayed payments, and recover your business debts. Luckily, there are ways for you to both collect debts and preserve your important business relationships. You can do it via telephone calls, by sending letters and reminders, using the help of a debt collecting agency, and by paying a personal visit.

Telephone Call

Contacting your debtors by telephone personalizes the situation, making it a valuable and effective way of reminding them about unpaid invoices and getting a response. Do not rely completely on post and email. Phone calls can be made as a friendly reminder and will allow you to maintain the relationship with the debtor. It can give great results, even though it is not effective as a personal visit.

Collect your debt via phone call
A friendly telephone reminder about unpaid invoices could result in debt collected,
or be an initial step in pursuing your debt recovery.

Personal Visit

When it comes to debt recovery, personal visits are considered as the most effective way for achieving it. However, you should know what you want to achieve and how you will do it before you visit your debtor. What is the owner like? Is he ready to talk? Does he avoid eye contact during conversation? Does he look welcoming? If the debtor is another firm, look around to see how the place is generally managed and whether the employees look busy. Be realistic and straightforward during the conversation, and see how much you can recover (probably not the whole sum). Ask for personal guarantees and post-dated cheques. Get back as much money as you can, focus on maintaining your business, and consider the rest of the debt as an unplanned expense.

Personal meeting with a debtor
One of the most effective methods in collecting your debt is to pay a personal visit to your debtor, for which your should prepare and try to collect some debt right away.

Letters and Reminders

Sending letters and reminders is the least effective and impersonal way of reminding customers about their debts, but also the most common one. This is the easiest option one can opt for, and it works with debtors who intend to pay, but have delayed their payment for some reason. However, this is a bad collecting strategy if the customer is a habitual late payer.

Preparing a letter to debtor
With some of your debtors, a letter reminder might work out, although it's usually
not an effective strategy in collecting debts.

Debt Collection Agency

Debt collection agencies are professionals whose help you can use for having your debts recovered. These agencies charge commission for their services, and the size of the commission depends on the size of the debt that needs to be collected. If your debt problem keeps getting bigger, consult one of these agencies in order to find the most effective solution for your debt recovery problems. Most debtors fear debt collection agencies, because these agencies have to report the debt to the credit bureau. Thus, they usually pay their debts to avoid the involvement of the credit bureau.

Hire a debt collecting agency
As a last resort and the most effective method for collecting debts is to get a debt collection agency to provide best solution to your debt recovery efforts.

Before you start collecting debts, familiarize yourself with all the important details. Is the debtor a habitual late payer? Did you deliver the products or services according to all contract regulations? Whose fault was it in the first place? Make a list of all the debts you need to collect, prioritize them from oldest to most recent, and then chase them up. After it is done, both parties should feel pleased for managing to carry on a quality business relationship.

Always monitor late payments and unpaid invoices in order to keep the debts as low as possible. Instead of letting the problem get bigger, avoid further debt increase. When collecting debts, show understanding and tolerance. Do not make your customers feel threatened.

All above images courtesy of Pixabay

Diana Smith

Author bio:

Diana Smith is a full time mom of two beautiful girls and a passionate writer. In her free time she enjoys writing about a variety of home and small business subjects, including marketing and promotion.

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