When you run a business one of the most fundamental pieces of the puzzle is ensuring that you’re being paid for the goods or services you are providing.
If you end up with a stack of customer invoices that are unpaid, it can lead to the cashflow of your business being impacted, which can lead you to have issues with being able to pay your staff or even pay your own bills.
While the reality of being a business owner is that you will most likely come across a customer who doesn’t pay, there are some steps you can take that will prevent this from occurring.
Here are some of the things you can do to help you avoid customers and bad debt.
Have a Strong Client Contract in Place
We cannot stress how important a contract or trading terms document is when you own a business. This document outlines exactly what you expect from your clients, as well as what they can expect from you when you work together.
Some of the details will include time frames of the goods and/or service to be completed, the costs, as well as when costs are due. And it’s not worth entering into any business deal without these terms clearly in place.
Even when you know a client well or you’re working for a friend, a contract is a piece of protection for both of you.
If they don’t pay, you have stipulated the terms to them, and it gives you more of a standing in case you need to pursue further action to receive payment. The contract protects them because it outlines what you’re going to do in exchange of their payment.
Don’t be afraid to put a contract in place, it is a fundamental part of running a business.
Do Credit Checks on Potential Customers
While all clients and deals have a level of temptation, especially when you’re running a newer business and you just want to make a profit, but it’s important to remember that not every potential client is a good client.
It pays to do a little research.
Now, the effort of the research will be somewhat dependent on the type of business you run, for example, if you’re working with a customer on a once-off basis for a relatively low-cost product or service, then you might not want to spend too long on this. However, if it’s a particularly large business deal or something that is likely to be ongoing, it’s a good idea to understand who you’re working with.
We’re not saying to go out and hire a private detective to do some snooping and dirt digging, rather, we’re suggesting that you run a credit report on your potential new client.
A credit report can provide you with an overview of their past behaviours and current debts and may be the best way to identify possible red flags. This will give you an understanding of their habits and give you the ability to decide for yourself as to whether they are someone you want to build a business relationship with.
Have an Accounts Receivable Process in Place
When it comes to your business, cash flow is king. You need to know where money is coming in and where it is going out.
If you’re not keeping track of it properly then you don’t have much hope.
This is where having an accounts receivable process, preferably with a dedicated staff member, helps. They can keep track of all payments and can also help with debt recovery processes when payments from customers are overdue.
While the process may look different in each business, there should be steps in place to allow you to avoid spending too long on chasing up payments – because after all, there are a lot of other things to be thinking about in your business.
Know When to Work with a Professional
If you have unpaid debts and delinquent customers, this isn’t something you need to struggle with on your own. Even businesses with the most robust accounts receivables processes in place have problems with customers who won’t pay, but they know when to stop wasting their own time on solving the issue.
A great business will work with a professional, like a debt collector, who can help to recover these unpaid invoices.
While debt collection might seem scary, they can actually be one of the most efficient ways for you to recover unpaid invoices as they have the tools, knowledge, and experience to be able to actually get results.
If you’re looking for a debt collection agency Melbourne, Sydney, Brisbane, or anywhere else in Australia for your business, look no further than the team at JMA Credit Control. They are experts in recovering debts and maintaining your professional integrity.