Things to remember when chasing debtors in the new year
If you fail to plan, you are planning to fail.
So begin a successful new year by ensuring you plan ahead. One of the most important aspects of running a successful company is keeping track of your incoming and outgoing expenses, including those who owe your company money. Running a business can already be a stressful endeavour and debt collection challenging. However, no business owner wants a problem when trying to ensure they are paid correctly, appropriately and on time. We have compiled key tips to help you navigate debt collection effectively in the new year.
The importance of debt collection and why you should do it in the new year
Ensuring your company’s success can come about in numerous ways; one way to ensure your business runs smoothly is through effective and timely debt collection. It may seem arduous and time-consuming, but it is essential. When a company does not chase its debtors, it risks losing money and revenue rightfully owed. Therefore, in the new year, businesses must prioritise debt collection to protect their bottom line and ensure a smooth start to the year.
Debt recovery is important for a variety of reasons.
- Revenue: When a company does not chase its debtors, it runs the risk of them never paying. This may lead to significant financial losses for the company.
- Reputation: Not following up on your debts can damage your reputation. Potential customers may be less likely to do business with a company that does not seem committed to collecting what is owed to it.
- Employees: There is the potential to lose valuable employees who may leave as they do not see the company making an effort to collect what is owed.
These reasons underscore why chasing debtors should be a high priority for your business in the new year. By making this a priority, companies can protect their bottom line and ensure they do everything possible to settle their outstanding debts.
Guidelines for organizing your chase
When you are chasing debtors, it is important to have a plan in place. This helps ensure that you are organised and efficient in your efforts. Here are some guidelines for organising your chase:
- Establish a timeline for pursuing the debtors: This will help you stay on track and ensure that you are not letting any debts go too long unpaid.
- Create a system for tracking the debtors: This can include contact information, outstanding balances, and payment history of all the people who owe money to your business.
- Develop a strategy for contacting debtors: This may include letters, emails, or phone calls. Be sure to tailor your approach to the individual debtor’s situation.
- Stay organised and keep track of all communications with the debtor: This will help ensure a clear paper trail in case any disputes arise later on.
- Follow up with the debtor until the debt is paid in full: Do not let up until you have received confirmation that the debt has been fully paid.
How to effectively communicate with debtors?
When it comes to communicating with debtors, it’s important to be polite and understanding. However, you also need to be firm and clear about the expectations of both yourself and your debtor. It’s important to ensure that you’re both on the same page regarding the debt and that you’re both working towards a solution.
Do not be scared to have some fun and try a light hearted approach to begin with. One such example is mentioning that you were hoping to purchase some gourmet sausages this week, but had to get the generic brand due to some outstanding invoices not being paid.
If the debtor is having trouble making payments, you may want to consider a payment plan. It will help them avoid defaulting on their debt and losing money. You may also consider offering a lower interest rate or a longer payment term to make the plan more affordable for the debtor.
If the debtor is unwilling or unable to make payments, you may need to seek legal action. However, you should try to pursue all available avenues prior and try to come to an amicable settlement agreement, as legal actions can be costly and time-consuming for both parties. This would allow them to pay off their debt in instalments and maintain a civil relationship.
What to do if you're unsuccessful in collecting payments?
If you’re unsuccessful in collecting payments from debtors, there are a few things you can do to try and get your money back.
- Send a demand letter: This letter will remind the debtor of their obligation to pay you and give them a deadline to pay. If they still don’t pay, you can take them to court and sue them for the amount they owe you.
If you win in court, you can use the judgement to collect on the debt.
- Seize their assets: Another option is to try and get the money from the debtor’s assets. It could include their bank account, property, or wages. It usually works well for a secured loan where the debtor has put down collateral instead of the loan.
Sell the debt to a collections agency: You can also consider selling the debt to a collections agency if you have exhausted all other options and need a different method to collect your outstanding debts.
About Sphere Accountants & Advisors-
If you are seeking advice on protecting your assets, your search ends with Sphere Accountants and Advisors. Through working with Sphere Accountants and Advisors, we consider the complete picture and continually look for ways to improve your financial situation to create, protect and grow your wealth. We apply this approach whether you come as an individual or a business. With a breadth of expertise spanning all aspects of taxation, accounting, financial planning and more, we can offer a complete solution for all your financial needs.
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