At some point, nearly all small businesses are confronted with a customer who refuses to pay. The work has been done or the goods supplied yet the customer still won’t pay. This can be very stressful for a small business – especially if the amount involved is having an impact on your own cashflow. Given that the work has already been done or the goods delivered what can you do to collect the amount outstanding?
If you do not send out your invoices on time with regular reminders it makes it much easier for a customer not to pay. It is also important to remember that a phone call usually has more impact than just sending email reminders.
When contacting a customer, you do need to keep in mind The Debt Collection Guidelines for Collectors and Creditors published by the ACCC. These guidelines state that you can have non face to face contact with a debtor up to 3 times a week or 10 times a month when following up on the payment for an outstanding debt.
Sometimes an outstanding invoice can be paid by simply asking the customer directly if there is any reason for payment not being made. It may be that there was a problem with the order that you are not aware of. If you able to rectify the problem quickly this may be all it takes to get payment.
Another common reason for an invoice being overdue is that your customer is suffering from their own cashflow problems. If they are a valued customer, then you may consider offering an instalment plan. However, if you decide to this, it is important to carefully monitor that the instalments are paid by the agreed due dates – so you can take immediate action if an instalment is missed.
Depending on the circumstances, it may also be worthwhile, to offer a discount to your customer. Even a relatively small discount may be enough to entice a customer to make an immediate payment.
If you feel uncomfortable negotiating directly with your customer you can choose to engage a professional mediator to act on your behalf. Some debt collection firms (including Brodie Collection Services) provide professional mediation services. By doing this you can potentially get paid without the expense of going to Court.
Hire a Debt Collection Firm
If you have tried to get payment from your customer using the techniques above but have not been successful – then it’s time to consider engaging a debt collection firm to help you. Although you may think the debt is uncollectable – debt collectors do this work every day and have a much higher chance of recovering the debt.
It is always best to engage a debt collection agency that works on a ‘no collection, no fee’ basis (such as Brodie Collection Services) – that way if the debt collection firm is not successful in collecting the debt, you are not out of pocket.
Start Legal Action
As a last resort, you need to think about taking legal action. This can be a difficult decision to make. However, some debt collection firms (like Brodie Collection Services) make this decision easier. This is because Brodie Collection Services is prepared to proceed and file a claim with the relevant State Tribunal on your behalf for debts of $3,500 or more. Additionally, they will upgrade the Tribunal Order to the Magistrate’s Court (at their cost) so legal enforcement measures can be instigated.
Many small businesses find it difficult and time consuming to chase outstanding debtors. However, it is an important job as your business will end up with cashflow problems if you do not actively chase debtors who do not pay on time. If you need help, Brodie Credit Control Solutions, the consulting arm of Brodie Collection Services can help you with trade terms, debt collection methodology improvements, customised commercial credit template forms and assessing the risk of doing business with a new customer
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.