You have heard it all before – the best businesses have strong cash flow and manage their debtors well. This can be extremely difficult, especially if you’re starting and trying to raise funds to get your business going. It’s also more difficult if you have poor business credit, as fewer funds will be made available through loans or contracts with clients and suppliers alike. Here are Seven Tips for Debtor Management effectively.
Don’t Be Shy To Ask For Payment
Being a business debt defaulter isn’t a crime, but it is bad business. If you want to be taken seriously as a businessman (or woman), be open and transparent about your money matters, discuss payment terms, and set expectations. If an employee or contractor doesn’t pay, don’t keep them on board—this will only hurt your business Credit Health Check.
When Things are Delayed
Have you been waiting to hear back from your business debt defaulters? Set expectations by sending them an email or giving them a call. Explain that you’re still interested in working with them but would appreciate a response on when they’ll be able to make their next payment.
The important thing is knowing how to handle it when it does happen. There are many ways to deal with late payments, including setting up automatic reminders via software (which will save you time) and speaking directly with clients who have fallen behind.
Poor Credit Score
Did you know that failing to pay your bills on time can impact your credit score? A poor credit score can be responsible more difficult to get a loan, rent a property and even earn a higher interest rate. If you’re having trouble getting started in business because of bad debt management, here are some top tips for improving your business credit health check.
Have liquid savings
Suppose you’re trying to raise funds for your business. In that case, one of your main priorities should be to have a readily available source of cash that can fund operating expenses until your business is making money.
Setting up a line of credit with your bank can help ensure that you have an easy way to access additional funds in case you need them. It may even be possible to transfer loans from other sources like family and friends into a single line of credit that lets you keep track of multiple sources at once.
Get it in Writing
In business, having written agreements is essential. While you’re looking to raise funds for your business and don’t want to impose on your limited time, it is a good idea to formalize these relationships with contracts and signed copies of any work undertaken.
When managing debtors on your business credit health check, you get a signed copy of each invoice/bill/statement raised and a signed letter confirming they have received it.
Keep Them on the Hook
When someone is already indebted to you, it’s tempting to keep that person on a tight leash and have them honor their agreement. While it’s worth being concerned about debt defaulters, be realistic about what you can do about them.
Be nice but firm with any business debt defaulters—and focus on raising funds for your business with people who are more likely to pay you back.
Collection Agency & Small Claims Court
If you need to collect on your business debt, you have a few options. You can try negotiating with your debtor one-on-one, but if they’re unwilling to pay or a small amount of money, that might not be worth your time. Instead, consider contacting CreditQ.