Past Due Receivables Are Frustrating For Business Owners
For every business to operate efficiently, a consistent cash flow is very important. When there are many bills that are past the due date, trying to collect all the payments can be frustrating. As it is a very time-consuming procedure, many business owners don’t put in effort in the collection of receivable bills until they are way passed the due date. Sometimes, they even write it off as uncollected without making any effort to collect. This can cause serious problems in the company’s profits and cash flow.
Here are four tips that can help you as a business owner to collect past due receivables.
Hire Debt Recovery Services
This is a proactive step to ensuring that the payments are done on time regardless of the deadlines, amounts owed, and payment methods. When you hire business debt recovery services, it is then their work to collect past due receivables on your behalf. There is a percentage charged as a fee that is determined by the amount of the debt. For example, if you have a debt of 1000 that is not paid by a client, then the debt collection company will pay you 800 and collect 1000 from your client.
Proactive Collection Staff
Make sure your staff or you are proactive in invoicing to collect past due receivables. You can inform your clients in advance what the payment policy and terms are. Do not wait for the bills to go past the date before reminding the client that he needs to pay the due. Send weekly updates to clients whose payments are nearing the due date. Implementing a debt collection accounting software will be a helpful tool to remind you of the debts and keep track of all clients
Offer A Discount
Sometimes even a small discount can encouraged making payments to you. Offer the clients or customers a 2 to 3 percent discount if they pay within one week as compared to 30 days or the due date. However, if you are in the type of industry where your profit margins are very low then this discount could be a lot of money. If your business can afford it then offering a discount on early payment can boost cash flow.
Propose Payment Plans
Sometimes the clients themselves are in a bad financial situation and will inform you that they cannot pay the past due receivables. Consider offering them a flexible payment plan. This will be helpful for the clients and also build loyalty in the long term. Assure that the new terms of payment are in writing and detailed so the client knows how they have to pay and when. Writing off the debt will be more expensive to you, so it is better to offer a flexible plan. This way you are at least assured that the money will be returned eventually.
These tips can help you collect past due receivablesmaintain the cash flow in your business. To make sure that it remains consistent, consider on-the-spot cash payments for your services or products. If that is not possible, then you must be proactively involved in the collection process from the beginning itself. This will save you a lot of stress in the future when you do have a cash flow problem but your funds are stuck.
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