6 Mistakes to Avoid When Collection Debt

Whether you’re a small, medium, or large-sized business, or a sole-proprietor, you know that recovering debt can be challenging and exasperating. You’ve upheld your end of the bargain and rendered the products and services to your customer and must now wait for payment. 

A day passes, and then another. Days turn into weeks, and weeks may turn into a month. The longer you wait for payment, the more frustrated you feel. Of course, the last thing you should do is give in to the frustration and react in a way that makes the debt irrecoverable. 

Here are some mistakes you should avoid when collecting payment:

#1 Don’t Forget to Sign a Contract

Many customers may pressure you to forgo a contract, especially if you’re starting and looking for business. Unless the customer is reputable with many references, it’s a bad idea to skip the contract phase of the negotiation. 

Additionally, have a legal professional examine the contract to ensure that it’s sound. You may also consider adding clauses like early payment discounts and late payment charges to ensure that your client pays by the due date. 

#2 Don’t Forget the Background Check

The best way to deal with a new customer is to conduct a background check. You can quickly cross-reference their information online. Watch out for red flags like false addresses and fake telephone numbers. 

Additionally, ask for references before extending credit. You may also inspect their credit report to ensure that they’re trustworthy. Of course, you don’t have to extend credit. Make it a policy to start work only after a large down payment to avoid scammers and other fraudulent customers who want to take advantage of you.

#3 Don’t Invoice to The Wrong Department 

Learn what person or department is responsible for paying you and ensure that your invoices are addressed to the correct department. Dave from marketing is unlikely to help your company get paid quickly. 

#4 Don’t Lose Your Cool 

It’s a good idea to remain professional even with the most challenging customers. Aggression, threats, and harassment are usually counterproductive. While you should always send polite and professional timely reminders, avoid overdoing it. Likewise, if your client is rude, don’t respond in kind. They’re more likely to pay you faster than other creditors when their financial situation improves if you remain on courteous terms. 

#5 Don’t Be Rigid

Cash flows can suffer in a tight economy. Try to be flexible with a late-paying customer with whom you’ve had a long relationship. Let late payment fees go and offer payment plans. Communicate with them clearly if you have pressing needs to receive an installment faster.

#6 Don’t Waste Time

The last thing you should do is waste time, especially if you notice any red flags in your customer’s behaviour. Your money will be harder to collect with each passing day. Consider hiring a commercial or consumer debt collection firm that can turn your unpaid invoices around without damaging your reputation or relationships in your industry. 

Avoid these six errors to improve your chances of getting paid by the due date. The right measures, practices, and professional services can improve your accounts receivables position in no time. 

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