Every business that sells goods and services on credit must come across customers who fail to honour the laid down payment terms. Most customers find themselves in such a state due to declining business, job loss, or sickness, among other reasons. Some customers also fail because paying the debt isn’t their priority.
At the end of the day, your business needs money to stay afloat. Because you’re selling goods on credit, you must, therefore, set up comprehensive debt recovery measures. Because of the complexities involved in debt recovery, many businesses choose to work with a debt collection agency.
Working with a debt collector or not, you must find ways to avoid bad debt. By establishing measures to minimise instances of bad debt, you’ll not only end up with customer base that’s more likely to pay but you’ll also spend less on debt collection services Sydney, Melbourne, or whatever other places in Australia. If properly implemented, you’ll also have a cordial working relationship with your customers.
The ways are many, and you should just use what befits your business model. Below are a few of them.
1. Examine Creditworthiness
Before you sell goods or services to a customer on credit, you must run a background check on the customer to determine whether he’s likely to pay for them in line with your credit terms. As a business in Australia, you’re allowed to request and be furnished with information relating to the creditworthiness of another organisation or individual who’d like to purchase things from you. You can get such information from the many agencies in Australia that provide credit assessment services. You can work with them to obtain information relating to a given customer’s creditworthiness. Where possible, you can also conduct an online search to know more about whether the customer is creditworthy.
2. Use Contracts That Show Clear Terms
As you go into business, be sure to set up credit terms that are very clear to your customers. Even though there are third party credit terms that you can borrow from, you’re free to define your own. Include things like time-frame, credit limits, and late payment penalties.
3. Develop A Thorough Application Process
A perfect way to control who receives credit services is to formulate a thorough application process in which you gather information about the new customer, including their business registration details, location, credit status, and the period in which they’ve been business, as well as any other information that you believe will make it possible for you to make an informed decision about a credit sale.
4. Work With a Debt Collection Agency
There are many debt collectors Sydney, Melbourne, and other geographical locations across Australia that you can work with. Ensure that you make your potential and existing debtors aware that you’ve got a working relationship with a debt collection agency Melbourne, and that you refer all late payment cases to the agency. Most people would avoid delaying their debt payment if they know you’ll forward their cases to a debt collection agency.
5. Alert Your Customers of Scammers
There are many cases in which customers make payments to the wrong accounts. Scammers may collude with people who’re privy to the workings of your business to get details about your business operations and use the information to approach your debtors to scam them. Ensure that you inform all your potential and current debtors about such scammers and the procedure to use to verify any changes relating to the terms of the contract. Doing so will protect them from paying to the wrong account.
You’ve got the prerogative to decide on the terms on which your business operates. Choose what works best for you and safeguards your interest. Just ensure that you don’t implement any measures that’ll chase away your potential customers. Whatever it is, you must always ensure that your customers are feeling embraced.