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5 Debt Collection Mistakes Made By Small Business Owners



Proper debt collection is paramount to your business more than you think. That’s because delayed and unpaid payments from previous transactions or projects can pose a big threat to your growth. Remember that the last thing you want is your business to dry up because of uncollected debts that were handled properly.

In this piece we’re gonna talk about some of the common mistakes of small businesses like you when it comes to debt collection, and how these mistakes can affect your financial growth.

Mistake #1: No Written Contracts

This is probably one of the biggest mistakes any business owner can do to hurt their company. We’ve seen many cases like these where owners are more comfortable to strike a deal with just a nod and a handshake. Which is not fundamentally right.

The best way to start a project is to legitimize the deals by putting everything on paper. This way, both parties have something to hold on to when everything goes south. Trust us, even your longest-time client will someday refuse to pay their dues. Been there.

So next time you close a deal, make sure to put it in paper before you shake hands.

Mistake #2: Not enough research.

Many business owners are smart enough to get their research first before doing transactions to prospective customers or clients. Basic information, business and personal credit reports of your customers and clients can paint a good picture of how reliable they are.

Looking at these records will help you assess whether transacting with them is good business.

Fortunately, securing a copy is easier and more affordable now. Spending a little on these reports can really do something good for the biz. Here’s what you should look for in a business credit report:

  • Fresh ASIC/Business Name Search

  • ASIC current extract

  • Summary of Partners/Directors business relationships

  • Past Credit Enquiries on all Partners/Directors

  • Adverse information on all of the Partners/Directors

  • Default information on all of the Partners/Directors

  • Bankruptcy details

  • Insolvency details

These details are basically warning signs. Make this your basis in looking for red flags on your prospects. If they’re clean, it’s probably good to do business with them.

Mistake #3: Not Managing Receivables properly

As your business grows and more clients or customers come for your services, it’s important that you still manage other aspects of your business like the receivables.

If you feel that your hands are too full to handle this matter, then maybe it's time to delegate someone from your staff to handle it or hire a professional to oversee the task.

If you know that you can’t handle the invoices efficiently, get a little help from others so you can focus more on growing your business.

Mistake #4: No Debt Collection System In Place

If you want to improve your cash flow, it’s only practical to establish a debt collection process in your business. Keep in mind that timely collection of debt improves your cash flow, and ultimately limits the risk of preventable financial loss.

If you don’t have a debt collection in place, cue this on your business meetings and integrate it in the system to save you a lot of money and time. If you don’t know how to set up one yet, do not hesitate to seek advice from experts.

Mistake #5: Not Hiring A debt Collection Agency

A debt collection system is one of the fundamentals of a growing company. That’s why a pile of uncollected debts is bad business, especially for small-time owners who are more susceptible to financial loss.

If you’re new to setting up a debt collection system for your company, then calling the assistance of professional debt collection agencies can save you a lot of time and money.

But before handing the key to them make sure that you’re entering a negotiation with debt collection agencies that are ethical, regulated, and accountable like our ever-reliable friends from JMA Credit Control.

Make an appointment with them and let JMA Credit Control handle your invoices and collection strategy. This way, you can focus more on expanding your business without worrying about your clients’ outstanding debts!

Business Daily Media