Yet through obstacles like these, you gain valuable learnings and insights into consumer behaviour, your market, and business in general.
One area where you may run into hurdles is during debt recovery.
Healthy cash flow is instrumental to running a successful business, with the power to turn a struggling operation into a happy one.
In this blog, we explore some of the biggest obstacles that businesses run into during debt recovery.
1. Clear systems and expectations
Small businesses are known for moving quickly to try and hit the ground running. Often this comes at the expense of critical details, such as setting up a clear and streamlined way of doing things that everyone in the organisation can follow.
Taking the time to create internal processes and communicate these clearly with your team will ensure everyone is singing from the same song sheet.
It is also important to build and clearly communicate your external policies with customers, such as payment terms and cancellation policies so that there are no gaps in the system and everyone is clear and happy with the arrangement.
2. Time management and resource
Another common small business debt recovery problem is not having the time to follow up debts, despite the best intentions.
It can be easy to procrastinate because you are either too busy or would honestly rather be doing something other than chasing your customers for debt collection. The days and hours after a debt falls overdue are critical.
We should also remember that trying to do everything yourself is often not the most productive use of your time. If you are not adequately resourced for prompt debt collection, now is the time to sort it out
Carefully plan and build habits – assign a couple of hours every week to go through your outstanding debts and take necessary action. Taking these small business tips for productivity into consideration may also free up some time in your day.
Use the reminder notice automation in your invoicing systems such as Xero or MYOB or set up automatic calendar reminders for yourself to chase them up.
Assign one person to look after accounts receivable so they can take ownership of debt recovery.
Use a professional – outsourcing to our team of debt recovery experts at EC Credit Control can offer a very nimble solution for your small business.
3. Difficult conversations with debtors
It can be uncomfortable having tricky conversations, especially if it’s not part of your everyday practise. There is also the added worry of potentially damaging relationships and losing rapport with your customers, which many find a challenge of debt collection.
It is also common within small business to lack experience in conflict management or not be fluent in the type of language to use. Many of our small debt collection clients describe the feeling of having ‘put their foot in it’ when it comes to their debt recovery conversations and have felt relieved once they have handed over the problem to EC Credit Control’s team to navigate.
4. Customers going out of business
The reality is that your customers and their businesses may be declared insolvent without much warning. While customer bankruptcy is not an everyday occurrence, it is especially relevant to consider in the context of today’s COVID-19 pandemic and economic environment and can be particularly painful if you have customers with large balances owing.
Whatever the reasons small business fail, if this has happened you will want to ensure your chance of debt recovery is as strong as possible.
5. Tracking a large portfolio of customers
If your business sells to a large number of customers and offers them credit terms, often the sheer scale of your customer base can be the biggest debt collection challenge your small business faces.
With more people to follow up, it can become really hard work to reconcile your payments and keep track of all the outstanding debts. In our experience, this often results in customers and invoices slipping between the cracks, either by forgetting to firstly invoice them or failing to realise they have fallen behind and following up.
Whether you run an accountancy practice or a lawnmowing business, you are going to want to effectively manage each customer on your books with care.
These are just a couple of things you can implement within your business.
If you are noticing changes in a customer’s payment behaviour, we can help. Let’s chat through your options in more detail.
Fill in your details and your Business Support Specialist will be in touch within the day to arrange a suitable time to catch up.