Small businesses in Britain lost 6 billion pounds during the financial year 2015/16 from not chasing bad debts, public sector banks lost Rs 1.07 lakh crore to just 88 borrowers in India, and the list goes on and on.
It has almost become a norm that people borrow money, and then tend to escape it with denials and excuses. Or else, they stretch the timeline to an extent where businesses are compelled to cut a deal where they are liable to pay only a small percentage of the actual amount owed. The problem is that people think they can get away with their debts. When practically, they can’t.
As an SMB, you definitely can’t afford a pile of bad debts. Thus, I have come up with a few tips to ensure the timely payment of your debts.
1] Define terms and conditions clearly
Isn’t this point pretty obvious? Every company has its own terms and conditions, right? Wrong. It’s strange and highly disappointing, the number of SMBs that do not have their own set of terms and conditions regarding the payment procedures, are immense. For a few who have defined their T&Cs, the clients are not aware of it.
To have a clear and consistent approach when it comes to debt collection is necessary to avoid any kind of disputes in the future.
Debtors are extremely sensitive while repaying their old debts, but if you have defined boundaries to fall back on, it shouldn’t be a concern. Specify all your terms and conditions on all the credit application forms, emails, company brochures, and invoices.
2] Appreciate early payments and reward clients
Your clients are as important as your employees or maybe more. One helps you run the business and the other is the reason why your business is still in existence.
Most SMBs have an employee recognition program in place with defined margins over which you reward them in terms of appraisals, promotions, bonuses, etc. These programs are mostly designed to boost employee performance and encourage adherence.
That’s exactly what I am asking you to do, but for your clients. Reward your clients who have made their payments on or before time. It could be in the form of discounts on the existing payment or on future transactions until the payments are within the stated timelines. Don’t forget to mention your reward policy in terms and conditions.
3] Don’t be ashamed/frightened to speak to your clients about payment clearance
It has been observed that since SMBs operate on a small scale, they are either afraid to speak to their clients regarding their payment, thinking that it would dent or spoil their relationship, or are ashamed to do so, for obvious reasons.
But trust me, if you want your hard-earned money, you need to get the ball rolling. Every country has a specific time period before which you cannot legally pursue your clients. However, this does not stop you from carrying on activities like calling and emailing them to ask when can you expect your payment.
You don’t have to be extremely upfront, you can also give a call in lieu of feedback and in the end, remind them of the deadlines specified.
I know it’s not a cake-walk to schedule calls every 10-15 days, but this extra effort displays that your business has an efficient credit control department. Once the maximum time is reached in respect of your stated terms and conditions and the laws of the country, schedule a call daily to deliver a message of urgency to the clients.
4] Invest in the updated technology and right IT systems
It is 2019, and you cannot solely depend on excel spreadsheets to chase payments, especially when there are so many advanced software and technology available in the market.
In the age of digitization, when machine learning and artificial intelligence are the most popular investment targets for 2019, you have to keep your technology game on point.
You must have a clearly defined process right from sales to payment collection. A clear overview with excellent personnel and efficient strategies will help you design a successful credit control process.
Specialized technology will be your best bet in order to ensure the mentioned. It will not only help you keep a tap on late payers at a click of a button, but will also guide you in chasing and recovering your money.
Now that you are aware of the nitty-gritties for a credit control process, it’s time for some action. As an SMB, it might get too much along the way. But don’t forget, hard work pays off in the end!