Debt collection and credit control can be a challenge for any business. Yet failure to deal swiftly and effectively with debtors can threaten your viability and put your future and the future of your employees at risk.
Here are some of the key approaches to ensuring prompt payment.
This is the obvious first step. It requires frank communication with the debtor to discuss the outstanding payment and find a mutually agreeable solution.
During the negotiation process, it is important to maintain professionalism and clearly communicate the expectations and consequences of non-payment. A cooperative approach may help preserve the business relationship and lead to a successful resolution.
If you have a good personal relationship with the debtor and wish to maintain a good relationship, it may be a good idea to ask a business colleague or your solicitor to do the negotiation for you.
A payment plan allows debtors to repay the debt in instalments over a specified period.
Offering this option can encourage debtors to fulfil their obligations while not putting them under too much financial pressure.
However, it’s essential to establish clear terms and conditions, including the repayment schedule and any applicable interest or fees. Regular monitoring and follow-up with the debtor can help ensure compliance with the agreed terms.
If negotiation and payment plans prove unsuccessful, you may need to consider legal action to recover the debt.
This can be as simple as asking your solicitor to draft a letter to explain firmly but politely that prompt payment is required. The letter will show the debtor that you are getting serious and it’s often enough to secure payment.
If that doesn’t work, the next step would be to seek a county court judgment against the debtor. Just the threat of court action and the potential shame that would follow is usually enough to make most debtors pay up. If not, your solicitor will be able to help you pursue the claim through the court.
While pursuing payment, it is crucial to comply with debt collection regulations and avoid unethical or aggressive practices. There are specific rules and regulations governing debt collection, including the Consumer Credit Act and the Financial Conduct Authority guidelines.
Aggressive or confrontational debt collection methods employed by some unscrupulous agencies can harm your reputation and strain customer relationships.
Make sure to strike a balance between assertiveness and professionalism, when pursuing debt collection and aim to resolve issues without alienating your customers.
Through negotiation, payment plans and legal action, it’s usually possible to both secure payment and maintain a good business relationship for the future.
If you would like help with debt collection and credit control, please contact Carly on 01228 516666 or click here to send her an email.