The 5 Most Common Debt Collecting Mistakes and How to Avoid Them
Sure, it’s uncomfortable to talk about money. Especially if you’re having to ask a customer to pay a bill. Yet, outstanding debt is costing your business, to the tune of over $825 billion owed to small businesses alone.
Don’t let the invoices pile up. By knowing how to avoid common debt collecting pitfalls, you can get the cash flowing back into your business again.
To help get you started, let’s look at 5 mistakes to avoid to collect debts.
1. Being Too Nice… and Too Harsh
When it comes to collecting debt, there’s a sweet spot to the right approach. Being too nice opens the door for customers to take advantage of you. Act too harsh and you’ll turn customers away completely, not getting any cash.
Find a middle ground. Grace periods are ok as long as you consistently follow through with consequences of late behavior. Find an approach that works and stick to it.
Being understanding yet firm is the key to getting the bills paid.
Sometimes there’s just not enough time in the day to get everything done. And when collecting debt is the last thing you feel like doing, it gets pushed to the back burner.
Don’t allow outstanding debt to sit for too long. Not only will the collections start to add up, it’s taking away cash flow from your business.
Set time on your calendar every week to get it done. Or hire someone to take over the tasks for you. Consistently collecting on past due debt will benefit your business’s bottom line.
3. Harassing the Customer
As much as you want to collect debts, it never pays to harass your customers. Excessive tactics likely have the opposite effect on customers than you’re hoping for, plus it could be against the law.
Never repeatedly call your customers. Don’t use bad language or threaten any violence. You can’t publish any information about nonpaying customers, and you can’t call their job and talk to their boss.
Know what the debt collecting rules are and stick to them.
4. Not Having a Credit Policy
Having set rules covering customer credit for your business helps clear any confusion if and when problems arise. Plus, vetting credit risks when people apply will help weed out those who may likely end up on a collection list.
Have every customer fill out a credit application and run their credit report. Extend credit only to those who have a good track record of paying their bills. Plus, always go over the rules and credit policies with each customer so the expectations are crystal clear.
5. Use Effective Forms of Communication
Sure, it’s easy and less awkward to mail a bill or collection notice to a customer rather than call them. Yet, that also makes it easy for those trying to dodge you to ignore your request.
Don’t limit yourself to the mail. It’s hard to avoid you when you’ve got a customer on the phone. Even text messages can be an effective way of collecting debt.
Collect Debts and Build Your Cash Flow
Get the payments you deserve. By knowing how to collect debts and avoid common mistakes, you’ll find it easier to mark those invoices as “paid”!
Need help with a debt collecting situation? Contact us today and get a free consultation!