Debt collection practices to revisit before 2019

debt collection

The Australian Supplier Payment Code is administered by the Victorian Small Business Commission. Under the code, businesses are asked to pay suppliers within 30 days of receiving an invoice and to not after the arrangement without a valid reason. Nevertheless, has debt collection become an everyday task for many businesses and it is, therefore, important to train your staff in debt collection practices to secure positive cash flow and keep your business operating as usual. For your finance department, it is inevitable to be aware of your business’s payment terms, customer invoicing and your debt recovery procedures. To have procedure manual and financial policies available for every staff member to go through is important for successful in-house debt collection.

There are several ways to reduce the possibility from bad debt to occur in the first place. When dealing with a new customer it is advisable to run a background check on the business before offering credit and only release goods when payment has cleared. To protect your business from accounts receivables you should furthermore set safe customer credit limits and send your invoices out as soon as a job is complete in order to get paid on time. Your invoices should include all contacts and payment options to make it easier for customers to pay you. Some Australian businesses also offer a discount on early paid bills or on the next invoice to make sure they get paid until the due date. For a good relationship with customers, it is also important to keep regular contact and be open to discuss payment plans if a customer has valid reasons for not being able to pay an invoice to a date as agreed in the contract. To protect your business from bad debt, have terms of trade paragraph included in your contracts which states invoice dates,additional charges for overdue payments and the debt collection procedures ofyour business.

During a debt collection period, it is necessary to keep a record of all correspondence, whether it be phone, email or letters. Such documentation is helpful in case you need to take legal action or have a debt collection agency involved later in the process if your finance department is not successful in retrieving the outstanding payment itself.

Once you are sure a customer has not paid an invoice in time, you should get in touch with them through phone or email. Such friendly reminder is often enough to retrieve the amount past due date as there might have been a minor issue that can be easily resolved, for example, wrong payment option used or the money sent into the wrong bank account. To make it easier for the customer to pay quickly, always include invoice details in your courtesy reminder. If the customer denies you any contact or the payment remains outstanding despite the latest agreed payment date, send another email or try to get the person in charge on the phone.

After failing to make the customer pay with a final notice by either email or call, it is time to pay your debtor a visit in person and ask for payment. If all of the above attempts failed to retrieve the debt, consider sending a letter of demand but bear in mind that such a document can damage the established business relationship and inflame a dispute. A letter of demand lets the debtor know you are serious about retrieving the money owed and are considering legal action if the invoice is not paid by a particular date.

If you don’t want to go through the hassle of debt collection, hire a collection agency. Experienced debt collectors will be able to retrieve the amount owed in a timely and professional manner.

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