If you're in business, you know that you have to pay great attention to income and cash flow. You probably have a range of regular debts that you have to take care of, so you'll want to ensure that you bring in the money on time and without issue. Yet you may well run into problems as time goes by and find it hard to collect a specific debt. What should you consider before you make any serious attempts to chase the overdue amount?
The other party may have simply overlooked the obligation when an incoming payment is late. Clearly, it's important to follow up with them first by sending gentle reminders via email or phone call. However, if this approach falls on deaf ears, you first need to consider the size of the debt, the customer's overall value, and any associated costs.
Is It Worth the Bother?
Sometimes, it is not worth the time, effort, and expense of pursuing an amount, especially if it's likely to take some time to achieve the goal. You need to determine the value of your time (or whomever in your organisation chases these debts). Also, consider direct and overhead costs to see whether the outstanding sum warrants your investment in terms of collection.
Weighing up the Approach
When the customer disputes the invoice and won't pay, you need to weigh up the situation carefully. If they are a valuable and long-standing client, they may be simply going through a hard time or have a valid reason for their rejection. In this case, it may not be a good idea to pursue aggressive collection techniques but try to achieve a mutually agreeable outcome. Perhaps a payment plan would work instead?
Settling for Less
It is often worth taking less than the outstanding amount if it seems likely that you won't get anything otherwise. In the worst-case scenario, the customer may be pushed into bankruptcy due to how much they owe to various entities. Should this happen, their remaining assets will be prioritised according to the scale, category or number of creditors.
Handing over to Agencies
If the outstanding amount is substantial and you have failed to make any headway otherwise, you may want to bring in debt collection experts. They will have experience in dealing with such a situation and handle the collection activity professionally. While there may be costs involved, they'll certainly take away your headache and allow you to focus on other things. They may well be able to recover the outstanding amount together with any associated costs.
Reach out to a debt collection agency for more information.