Is your business struggling with its cash flow even though sales are up? Maybe you need to get more organised. It is estimated that it takes the average customer 53 days to pay an invoice and nearly 60% of all invoices are getting paid late. It is unfortunate, but some customers will take advantage of a business that is disorganised and not pay you until they are chased for payment – which for some businesses may be many months after the sale.
The first step in getting organised is to keep a record of all correspondence with a customer in relation to the outstanding debt – whether by phone, mail or email. This information will prove valuable if the matter escalates and you need to engage a debt collector. It is extremely important that you follow up debts on a timely basis as the older a debt the less likely payment will be made.
The following are some simple steps to help recover those outstanding debt:
1. Friendly reminder
It is always a good idea to keep matters friendly to begin with. There is no point in ruining a customer relationship when there could be simple reason for the oversight – e.g. the amount was paid to the wrong bank account, staff turnover, the invoice was never received, or the customer was not happy with the products or services provided. At this stage a phone call or email may be enough to get the amount paid. Remember to include a copy of the invoice to make it easy for your customer to pay. Also set an agreed date for payment.
2. Overdue reminder
If the payment remains outstanding after the agreed payment date, it is time to make the process more formal. A formal overdue payment reminder should be emailed and / or posted to your customer. The reminder should state that immediate payment is required to avoid further action. The Business Victoria website www.business.vic.gov.au provides lots of useful information in relation to recovering debts from customers, including templates of letters that can be used when contacting customers.
As with the friendly reminder, ensure the invoice is attached to make it easy for your customer to arrange payment. A follow up phone call should also be made as it shows your customer that you are actively pursuing the debt. In fact, it has been shown that there is a much higher chance of getting paid if you make phone contact with your customer, rather than only sending out emails and letters.
3. Final notice
By this stage if you are still not getting paid you are probably concerned. This is when you need to issue a final notice. If you have kept records of all phone calls, emails and letters in relation to the outstanding debt these should be documented in the final notice, along with a statement that immediate payment needs to be made to avoid further action being taken.
4. Formal letter of demand
By now you will be thinking about engaging a debt collector as you still have not received payment. The final step before you do this, is to send a formal letter of demand that states that if payment is not made within seven days that you will instruct your solicitor to issue proceedings against them to recover both the unpaid debt and legal costs.
5. Engage a debt collector
If payment has still not been made, now is the time to engage a debt collector. It is the business of a debt collection agency to chase outstanding debts so even though you have not been successful does not mean you should write the debt off. Sometimes just engaging a debt collection firm is enough to get your customer to pay. In addition, by using a firm that only charges when a debt is recovered, you really have nothing to lose.
Brodie Collection Services is one of Australia’s leading debt collection firms, with offices in Melbourne and Brisbane. They can provide ASIC search services from a low $46.50. They also provide debt collection services on a no collection, no charge basis. You can trust them with all your debt recovery needs. Visit www.brodiecollectionservices.com.au to find out more about the debt collector services that are offered by Brodie Collection Services or call us on 1300 276 343.
This information provides a general summary only and is not intended to provide specific advice for your individual circumstances. It is not a substitute for professional advice and should not be relied upon as such.