What’s the difference between profits and cash flow? Think
of a customer handing you an IOU instead of cash – it’s not quite the same
thing. Making that big sale feels great, and looks great on paper, but until
the client actually pays you it doesn’t mean much. Unfortunately, that is how
business works, and one of the reasons why so many businesses have cash flow
issues.
You can have a great product, stellar sales team, generate a
ton of sales and still find your business in dire straits due to a negative
cash flow. Getting clients to hand over the cash can be a long, expensive, and
arduous process. Making matters worse, the older a debt is, the less likely it
will be paid. Most debts have a limitation period, and even those that don’t
often end up being renegotiated down.
Stop wasting your time on debt recovery, follow these basic
steps:
Keep records
The first step of debt recovery begins before you even agree
on a sale. Keep fastidious records about the clients, your products or
services, billing information, and every step of the negotiation process. If a
client tries to bilk you then you will need detailed records.
Offer incentives
It may seem counter intuitive, but if you have a client who
owes you money then you may have to consider giving them a break, or risk never
getting paid at all. Offering a discount to pay by a certain date will pique
their attention. Be weary however, if you end up doing business with the same
client again in the future then they may try to withhold payment in the hopes
that you’ll lower the price again.
In some cases the client may be in a similar position as you
– suffering from insufficient cash flow. Offering to negotiate to restructure
the payment could be in the best interest of both you and your client. After
all, if they go out of business then it will be one less source of cash in-flow
for you.
Debt collection calls
There is a very fine legal line between a polite reminder
and harassment. So even though it may be satisfying to let your client know how
you really feel about their late payments, it may be a costly mistake. You
catch more flies with honey than vinegar. Be stern but don’t cross any legal
lines.
Call J D Factors for
advice or to begin proceedings on your behalf.
Send a letter
Sending a formal letter to the client reminding them of the
debt that they owe and advising (but not threatening) that you may have to take
legal action is an important step. You need to ensure that the letter is
received by them, and that all information in the letter is accurate. You may
want to enlist a professional or legal counsel for this step.
Lawyer up
You always have the option of beginning legal proceedings
yourself, but navigating the law can be difficult and downright dangerous if
you don’t know what you’re doing. A much better option is to reach out to your
lawyer as early as possible, hand them all pertinent records, and ask for their
council. They may be able to advise you on legal means of encouraging the
debtor to pay up, and prevent you from putting yourself at risk of legal action
by straying from the law. When the time comes they will be able to fight your
case in court.
Enlist help
Using a debt collection service may be the only way to get
the money that you are owed, but it needn’t be your first choice. If a debtor
is reluctant to pay you the funds that they owe then, regardless of what steps
you take, it could be a while before you resolve the issue. That means that
your business could come to a standstill unless you take action to increase
your temporary cash inflow. If you find yourself in this situation, contact J D Factors.
With our accounts receivable
factoring services you have plenty of options to collect the money that’s
owed to you before you find your own company facing cash flow problems.
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