Do you have unpaid invoices from clients in your business that are simply difficult to manage?
If so, they may be a point of real stress for yourself and your business.
There are several strategies that you can utilise in order to ensure you are receiving payments from them without litigation.
In this article our debt collection agency will outline 7 tips for managing and identifying clients that won’t pay their debts and how you can prevent them from continuing to do so.
Minimise Unpaid Invoices by Researching Clients
A great first step in ensuring you do not wind up with clients that do not pay their unpaid invoices is to do some background research on the individual that will potentially be a new customer.
Of course, depending on the size of your business and the number of new customers you acquire at any given time this task may be a real challenge.
However, it will likely save you time down the track by avoiding clients that have a public history of not following through on debt payments.
The internet is full of information about practically anyone out there, all you have to do is look. You should, when researching, pay close attention to the business and financial information you may uncover about the other party.
Does the information discovered appear to be negative?
Furthermore, research the credit score and history of the potential client.
A bad credit score or a history of financial issues, such as insolvency and bankruptcy, is a glaring red flag that you should be steering clear of.
Of course, some businesses will not have the option to turn down too many clients, especially in the early days, so take this advice and apply it to the state of your company.
Check Bad Paying Clients by Speaking with Credit Agencies
You may also want to pursue advice and further knowledge on your client and whether or not you should engage them through a credit agency.
A credit agency can provide an extensive report on your client’s credit, both current and past, giving you a better understanding of whether or not this individual will benefit your company.
This report may include their credit score, payment history, financial stability, and legal entanglements.
Minimise Unpaid Invoices by Looking for Red Flags
Keeping your eye out for red flags is a great way to protect your business and ensure both your current and future customers are going to benefit your company.
Once you have a client and have had a pleasant/decent payment relationship with them, you may feel that you are in the clear.
However, it is important that you continue to analyse your clients and their behaviours regarding their business with you in order to maintain a positive cash flow and to prevent constantly following up on your customers for payment.
Some warning signs that may indicate a client has or is approaching financial issues are consistent, especially unexplained late or missing payments, significant changes in personal or professional life, and sudden issues contacting them.
Another glaring red flag is if you discover that your client has serious personal issues at the moment, such as sudden/large debts, a sudden drop in credit score, or court orders.
Stop Unpaid Invoices by Keeping in Touch
Remaining in consistent, appropriate contact with your client is a key feature in ensuring payments are made at the agreed-upon time and in full.
Contacting clients can be a tedious task, especially if you have a large client basis. It is, however, extremely vital and you should try to take the time out of your day (occasionally) to get in touch with them.
Speaking with clients can help to remind them of their debts to you, as well as lead them to believe that you are an active creditor that is not only involved with their clients but will not tolerate consistently missed payments.
Contact with debtors is regulated by the Australian Government though, so you should ensure that you are aware of these rules to avoid legal issues.
Be Open to Negotiation to Recover Debts
Negotiation is a big part of securing payment and ensuring that the debts you are owed, while not necessarily on your terms, are eventually paid to you.
Negotiation is the process of sitting down and taking the time to have a conversation with the opposite party to discuss or revisit the terms of your agreement to ensure the needs of all involved parties are adequately met.
This may seem like a pointless process. My debtor signed a contract, why should I adjust my terms?
Well, things may occur in the lives of your debtor that render them unable to pay back their debts to you based on the terms earlier agreed upon. In this case, they may declare bankruptcy or insolvent, meaning there is a chance that you will receive little to none of the money you are owed.
For this reason, you may wish to consider negotiating the payment timeline or other terms to make sure you receive at least a majority of your owed debt.
Recover Unpaid Invoices by Keeping it Friendly
It is vital that when you are engaging with clients, no matter how difficult they may be, that you stay polite and pleasant while speaking.
This is much easier said than done but keeping your temper under control is an important part of the business.
You may want to develop a professional friendship with your client to create a feeling of mutual trust and respect. This relationship does not have to extend beyond the walls of your office, of course, but just putting in the effort to make your client feel comfortable can go a long way.
Legal Action to Recover Unpaid Invoices
So, you’ve exhausted every option with your debtor. You have sent countless letters, messages, emails, the lot! All of your calls have been missed and you have not received any attempt to respond to them.
At this point, you may want to begin to consider legal debt collection action.
Of course, you may pursue legal action at any point of the overdue debt, but there are several factors that may lead you to not wish to do this.
You should also take into account whether or not engaging in a legal action will be worth your while.
Depending on the payment model of the collection agency or law firm, you may be required to pay for their service based on the number of hours they spent working on your matter.
If this is the case, consider whether or not you will spend more or the same amount of money on the legal fees as the debt actually is.
Advance debt collection is an Australia-wide commercial debt collection agency and credit and accounts receivable management. We can recovery your debts, conduct skip tracing, and manage your accounts receivable. We collect your debts for commission only. This means no collection, no commission. We are professional debt collectors with combined 20 years of experience to help you collect your debts. We are partnered with expert litigation lawyers with years of experience in debt recovery, enforcement, and insolvency. Under the Agents Financial Administration Act 2014 Advance Debt Collection Pty Ltd hold authority number 4583821 to act as a debt collector. ADC Advance Debt Collection® is a registered trademark.