Business debt. How do you manage late payers?


When it comes to new ventures or new small businesses, the most common problem that arises are late or missing payments. We can agree that chasing late payments can be frustrating and energy-consuming. But the problem is even more dangerous due to the fact that the process is very time-consuming as well as we need to bring a suit against customers who do not pay. More than that, legal procedures cost a lot of money. In one word, managing late payers, seems to be unpleasant and expensive.

When implementing a new business, focus should be on building the business, and ensuring its growth. Nevertheless, the process of following late-payers prevents businessmen from managing their ventures. The result is that entrepreneurs fail to focus on the major elements of the business, as they spend too much time on worthless things such as chasing such customers who have debts.

On the other hand, it is well-known that bad debt leads to decreased cash flow and in the long-term, it might result in bankruptcy, so the problem of late payers must be solved somehow in order to prevent such things from happening. Therefore businessmen need to focus on an efficient solution. So which are the appropriate steps that can help people avoid late and missed payments?

Probably the most important thing is to be aware of what you and your company are expecting to be paid for. In order to minimize the risk of bad debt, people must ensure that the invoices they issue do help their clients to pay appropriately and in a timely manner. Nobody should wait for prompt payments if the invoices given to customers contain errors or are difficult to be understood. When making the sale, people can get information regarding the customer’s accounts and process payments accordingly. So it is possible to time the particular invoice so as to fit the clients’ payments cycle.

Accuracy is another key term here. An invoice must contain all the obligatory pieces of information such the business name, the contact details, a minute description of the supplied products or services (quantity, quality, typology, and price), the VAT amount as well as the payoff terms. From the point of view of minimizing the number of late payers, it is extremely important for the invoice to be clear and it should contain all the necessary details. Similarly, it is essential for business people to agree at the moment of selling (namely, delivering) the goods on the price and the exact payment terms. Customers should be aware of how much they owe you.

Another useful advice is checking your customers' accounts. This means you are aware of the amount of money you are owed by each of your customers. It is a good idea to follow and check your major clients within your business community. Try to listen out for other people’s opinions about your clients, and also try to get as many pieces of information as possible directly from your customers. Think about the following: it is not all the same if your business partner does not make a payment on time because he/she is struggling with an enormous workload, or simply because does not have the necessary funds to pay you. Remember that if you see strange signs that could suggest that your partner’s business is failing, be suspicious and do not deal with that customer until the situation becomes clear. Unless the suspicious partner guarantees payment, do not make business with him/her any more!

Finally, it is essential for people who are involved in a business to chase due payments promptly. There are various alternatives to do this such as calling your debtors or e-mailing them to remind them politely that they have debts, and to make sure there are not any misunderstandings. Similarly, people are recommended to keep a record of each conversation. These can be useful proofs in the future. Recordings can easily be managed through the so-called Customer Relationship Management Systems.

Collecting bad debts can be done easily with the help of a so-called debt collection agency. These intermediaries can save you a lot of time, and this way you can get your money back, and in the same time, you can focus on your main business. Similarly, if you intend to choose a court procedure, first of all, get advice of a well-known lawyer or legal consultant! This is essential in order to see whether it is worth to continue the case, as it may happen that legal fees are higher than the amount you would get back from a late payer.

Remember that when dealing with debt-risk cases, businessmen should remind late payers several times about the settlement date and the exact terms of late payment that are listed in the invoice. If the risks of non-payment are high, people can offload the case to a factoring cy. This company will pay them the money they are entitled to get, except a small amount of factoring fee. But the result will be that they no longer have to deal with business debt problems  and they can also improve the company’s cash flow. As the factoring company buys the invoices, businessmen get their money back at once, without having to deal with their debtors.

One thing to remember: do not ever make business with those people who have been late with or missed a payment! And if you still face a late payment problem, treat it as a process that needs to be solved. Be patient and have the right attitude towards the case! If your business knows an efficient process of dealing with poor payers, your debtors will have no chance against you! Be very careful, and this way you can avoid unpaid fees! If there are still some clients who do not want to pay, be sure you have the right tools to collect such debts with an appropriate amount of interest. Usually, the majority of the customers settle their outstanding debts after they are reminded about it. But if reminding them does not help either, you can go even further to a debt collection agency or a factoring company. This way you can protect your business against late payers for sure!