7 ways to help recover debts
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Getting paid on time is critical to maintaining positive cash flow and, ultimately, the survival of your business. So, what can you do when someone hasn’t paid up? We detail the steps you can take to help recover money owed to you.
Start by double-checking the payment terms in your formal contract or written agreement to confirm that the amount due is outstanding. It’s also a good idea to see if you have included specific debt recovery options outlined in the terms of contract.
When you have an overdue payment, start by sending a polite payment reminder by email. A friendly nudge could be all it takes to get paid.
Remember to include the due date, payment options, banking details and your contact information in your reminder.
If you haven’t received a reply to your initial reminder, give the person a call or consider visiting them to ask for payment. Once you’ve spoken to them, they’ll be aware of the situation and you can judge if it’s time to escalate.
If your attempts to receive payment are unsuccessful, consider sending a more formal letter of demand. This is usually a final reminder, and lets the person know you intend to take legal action if you don’t get paid.
Consider a letter of demand a last resort, though. It could impact your relationship with the person or company.
If you’ve reached this stage, you may want to consider involving a third party. Before deciding on the next step you need to consider:
If dealing with a person directly hasn’t worked, you might need to seek external help. This could involve:
You might want to seek help from a debt collection service. Before you do, collect as much information as you can about the work carried out and the payment terms, as well as conversation records.
TIP: Let the person know that you intend to involve a debt collector. This could be the final nudge they need.
Chasing late payments can be challenging, but there is support available for small business owners who find themselves out of pocket, which don’t involve heading straight to court.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.