Debt collection in small businesses and larger companies are way different if you take a good look at it. That’s because unpaid debts will pose a bigger risk to smaller companies, impeding their entire cash flow and ultimately affecting the financial health of the business.
To prevent that from happening, debt collection must be managed strategically, and unnecessary mistakes must be avoided as much as possible. Below are some of the biggest mistakes that many small business owners might have made. So if you’re just launching a startup or planning to venture in a business, read on because these are certainly the things that you should refrain from doing.
1. Not Signing a Written Contract
Whether big or small business, signing a contract or whipping up one is a rule of thumb. Asking a client to agree on a contract might seem a little awkward for you, but trust us, this will prove to be beneficial for you in the future. This piece of paper will save you from any argument that might arise during the succeeding transactions.
If both parties signed a contract, you are both bound to comply with everything that it entails. Yes, including the dues. So next time you’re engaging on a gig, sign a contract first.
2. Not Knowing Your Client Well Enough
Acquiring basic information about your potential clients or customers is necessary to protect the interests of the business. Okay, this might come to you as a simple “stalking.” But in a more formal and professional stage of business, this is research. Before engaging with a certain party, you have to know first whether they have a history of reneging their contractual obligations from a certain project.
Business and personal credit reports are only some of the credentials that you have to review to see if a client is worth a shot. And in a business report, here are only some of valuable information that you will acquire:
- Fresh ASIC/Business Name Search
- ASIC current extract
- Summary of Partners/Directors business relationships
- Past Credit Enquiries on all Partners/Directors
- Adverse information on all of the Partners/Directors
- Default information on all of the Partners/Directors
- Bankruptcy details
- Insolvency details
Based on these credentials, see if your clients are qualified enough to receive the services that your company offers.
3. Not Handling the Receivables Correctly
Receivables are a crucial piece of the business. And managing them properly could make or break your survival in the game. So if you think, you can’t focus on taking such a daunting task because your hands are full, hiring someone to do it is a smart option.
You can either appoint someone from your team to handle the receivables or seek help from professionals who can carry out the task expertly. We suggest that you take the latter, especially if you and the team really have growing obligations.
4. Not Hiring a Debt Collection Expert
If you venture into business, expect that there will always be uncollected debts. They’ve always been part of the picture. The question is how will you respond to this dilemma? How will you smooth things out, considering that the financial health of your company is at stake here?
You know, it’s not wrong to seek help from professionals. When you have huge unpaid debts, hiring a team of experts, including a debt collection lawyer, is probably your best bet.
Debt collection agencies like JMA Credit Control can employ several strategies that have worked successfully in collecting dues from clients. In addition to that, by hiring them, you won’t need another manpower that would only take space and energy in your office. Which could be not that cost-effective for your business.
Most importantly, JMA Control will take the load off you so you can focus on growing your company and expanding your services which is the ultimate goal, right? So if you find yourself caught up in a big pile of unpaid dues by clients, it would be best to make that phone call.