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Most small business owners are often ill-equipped to deal with debt recovery for 2 reasons – They either lack the time and resources to do so or hate chasing their customers for timely payments. Debt recovery can be a costly and time-consuming affair, which can affect your focus on your business. Additionally, if it’s a large business that is refusing to pay up, the entire process can be uncomfortable and stressful, forcing business owners to just postpone debt recovery until it becomes too late.
As a small business, your clients and customers must pay you on time – your business will run into trouble otherwise. Bad debts and late payments can damage your finances extensively and lead to long-lasting repercussions.
Here’s what you need to do for ensuring that your business does not take an unnecessary hit as a result of your clients’ actions.
Send Them an Invoice
As usual, send an invoice to your customers, informing them of the amount they have to pay. Since your customers and you will already have signed an agreement regarding the payment terms, wait till the payment confirmation has been received.
Start Chasing Them
If the client hasn’t released the payment within the specified deadline, it’s time to send in reminders about the payment. You could make phone calls or send emails to your clients, requesting them to release the payment due for the services or goods you’ve provided to them. Inform them that failure to do so would result in further escalation.
If the situation shows no signs of improving, you can cease working for them until all outstanding debts have been cleared. This is known as an administrative hold or credit hold. This step usually resolves most debt collection problems since your client’s business could be affected adversely by this move.
Send the Final Notice
This is issued as a last resort move, failing which you can start legal proceedings against them. In the final notice, you should provide them with a deadline for settling the debts and notify them of your intention to sue them for the recovery of outstanding debts owed to you.
If your client doesn’t make any effort to clear the debt, even after the final notice has been issued, it is now time to move against them legally.
You have 2 options for handling debt recovery with the help of the law. The course you should take is usually determined by the total value of the debt that’s owed to you by your customer.
Small Claims Court
This court will provide both you and the client with a platform where you can mediate & arrive at a conclusion. This move usually results in the client being ordered by the court to pay off all debts, interest & fees that you’ve accrued by pursuing this remedy.
Debt Collection Agencies
You can also engage the services of debt collection agencies to solve your problem. They can represent you and liaise with the client to that effect or enforce the decisions made by the court.
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