10 Techniques for Recovering Past Due Accounts

Businesses often need to resort to debt collection tactics in order to recover lost revenue. If small businesses use these suggestions, they will see an increase in their debt collection success

• Maintaining a steady cash flow and collecting payments from clients without upsetting them are two of the primary goals of an effective debt collection strategy.
• Reviewing your invoicing and billing procedures, using accountants, and learning about your clients’ payment practices are all good debt collection techniques.
• Only when a client’s debt is 90 days or more past due and they are uncooperative or uncooperative can a collection agency be hired.
• This article is for business owners looking to enhance their debt collection processes.

The Importance of a Debt Collection Strategy

If you rely on business-to-business (B2B) services for revenue, there may be times when you must provide work for clients without first receiving payment. This is a standard business strategy, but it carries some risk if the client doesn’t pay on time, leaving a hole in your cash flow. This means you will have less money available for essentials. Effective debt collection measures decrease the likelihood of these types of headaches.

1. Review your invoices

Non-paying clients may not have paid since your invoices do not clearly state that payment is due within a particular number of days. You can reduce such errors on your end by evaluating your invoicing policies on a regular basis. This process requires looking at how you prepare invoices and ensuring that each of the following is present:

• An invoice date
• Contact information (name, address, phone number and email address) for both the creditor and debtor
• A unique invoice number or another identifier
• Payment terms and deadlines, including acceptable payment methods
• An itemized list of services with a unit price, quantity and total price for each line item
• A clear and obvious total invoice value

     2. Look at your invoicing policy

It is important to review not only the bills themselves, but also the process by which they are sent. If you bill your clients every month but are always short on cash, switch to billing  them twice a month. Alternatively, if you usually send invoices on the last business day of the month, try sending them on the first business day of the following month. This will help ensure that customers who make payments at the beginning of the month will not forget to pay you.

     3. Examine your billing software

Maybe your business creates invoices using Word or Excel templates. Though consistent, this method requires a lot of manual labor that might lead to billing errors. To cut down on these mistakes and save time, think about switching to invoicing software.

Automation in the invoicing process allows for tracking of client interactions with invoices, automatic follow-up on overdue accounts, and auto-population of invoice fields.

    4. Assess your billing communication policy

How you send and follow up on invoices affects payment speed. Many businesses send bills by email or apps and follow up delinquent invoices with quick emails, however email may not be suited for urgent debts. Set a policy to call debtors more than 14 days late.

     5. Help clients pay

Your invoices should provide payment methods. Not all payment options will be automatically accessible just because you list them as ones you accept. Don’t just say you accept PayPal—provide a clickable link.

     6. Immediately present billing terms

All clients should know your billing protocol, whether you have a credit policy or standard invoice terms. This could involve having qualifying clients sign your credit policy agreement as part of the initial contract or adding legal text to your invoices explaining how you might collect overdue debts.

     7. Verify how each client pays

Invoicing a company’s accounting department is different from invoicing your business contact. The accounting team may not get invoices sent to your contact at a client company, and an invoice that is late in reaching accounting will not be paid right away. Ask your clients who to invoice.

     8. Managing chronically late clients

It is unavoidable that at least one of your clients will consistently pay late. You can tailor your payment terms to these clients, but stronger collection tactics are available.

If your late client rarely answers to emails but is responsive to phone calls, ask your accounting team to call them within a particular time frame after payment is due. If this client has been late with one payment method, offer to switch. These customized collecting methods may help clients pay.

     9. Be proactive about payment -Don’t do it yourself

Call the client a week before the deadline to discuss any difficulties and record any payment promises. Stick to phone calls rather than email because phone calls are much harder to ignore. If you have the funds, hire an accountant or bookkeeper to supervise the invoicing and payment process. Accountants can also assist with tax preparation and other regulatory requirements.

     10. Hire a commercial debt collection agency

When a client’s debt remains unpaid, neglected, or resisted for an extended period of time, you may feel compelled to contact a debt collection agency. Both freelancers and small businesses can engage debt collection services to collect debts from non-paying clients, but this is dangerous. To begin with, it’s an excellent strategy for alienating the customer. It’s also expensive, typical costs range from 25% to 50% of the debt being pursued.

However, enlisting the help of a professional collection agency may be your best choice in some situations. If your debt is more than 90 days overdue and other efforts to collect it, such sending new invoices with late penalties or interest, have failed, then this is the situation.

If you find yourself in the position of having to pursue collections, read through our reviews and contact us to get your money fast. You should also become acquainted with the Fair Debt Collection Practices Act to ensure the collection firm is acting within the law and keeping you safe from liability.

Your clients may pay sooner if you combine your own collection techniques with the support of third-party professionals. Simply be patient, attentive, and tactful throughout the process.