To increase your chances of getting paid, act quickly and smartly. Maintaining a credit policy can help you avoid getting into this situation, experts say
The warning signs of a customer’s bad financial situation can be detected if the customer has reduced his orders, his payments are slow, he is avoiding your calls or his phone number or name of the business is change. This can be an alarming situation for you it means the customer is in some problem. Now what steps should be taken to recover your payments. Here are some most important five rules which can help you in tackling with such kind of customers.
1. Contact the Customer Immediately if Deadline is Missed
One major cause for late payments is the late follow ups from businesses. The chances of getting your payments from a defaulter customer falls down every month after the due date, from 81 percent after two months to 52 percent after six months, according to the Commercial Collection Agency Assn. If an invoice remains outstanding for 12 months, the chance of collection drops to less than 25 percent, the trade group says.
By calling the customer and inquiring all these things you can get to know the problem of your customer. This way you can arrange a revised agreement for payment and can give discount for early payments and most important this time you will make a deadline agreement signed by the customer so if this time he fails to pay he should know that he can suffer some serious legal actions.
2. Do Not Be Easy on Customer If Reason is Not Genuine
After all the revised agreement and conversation with your customer. Now if the customer does not fulfills the new agreement and fails to pay on the given date it means that the customer is untrustworthy. In this case you can stop all business deals you were doing with your customer, this way you can give some hard time to the customer and can make him to co operate with you. If the customer even after this serious steps does not co operates then you can involve the court for the payments.
3. Hire a Collection Agency
Now the business owner can also higher professional collection agencies, they charge from 10 percent to 25 percents of the total amount to be recovered according to their abilities. To get a good collection agency or attorney one can consult his business partners, competitors or someone of their specific industry.
4. Seek Out Legal Help
Small amounts like under $5000 can easily be recovered by claiming them in court. But for larger amounts one has to go to the civil court and the process of claiming money in civil court is very expensive as the creditor has to hire an attorney which consumes time and costs extra money. Even then if every thing goes well and the court orders in creditors favor that is good but if the debtor takes decision to fight back and not to pay the amount this can step of debtor can create a lot of problem for the creditor as the court will take much more time for decision.
Here even if all the documentation like agreement and payment mode etc are in your favor the debtor can make false allegations such as the good which you provided were defective or the delivery o f the goods were late. Here debtor can make any false allegation to secure himself which can make the court to decision against you.
Even after all this if the court gives the decision in your favor recovery of payment from the debtor is a really hard and long process. So to avoid all these problems one should make proper credit policy.
5. Create a credit policy.
To run your business successfully and to avoid the bad debts one should make a proper credit policy. For making a favorable credit policy one can search on net and can refer different associations of commerce and trade. Try to keep complete details of your customers, make proper agreements with your customers on all transactions of goods and specify each receipt of payments with its due date. Make rules and regulations for different hazards such as if the goods delivered are defective or late there should be a rule or process of complain the customers should fulfill all the requirements for credit purchase. If any customer changes its phone number or company’s name or the reputation of customer does not seems to be satisfying one should inform its competitors also this way in future you may have chances to get a favor in inquiring about new customer.
