So, you’ve started a business and managed to begin trading. That’s excellent news, and you should feel proud. Most companies fail within the first twelve months, and so you’re obviously doing something right. However, cash flow is always an issue for new firms. You might encounter situations where clients fail to pay their balances on time. It probably doesn’t matter too much to them, but a lack of funds could damage your operation. So, you need to follow a standard process to recoup the money. Just take a look at the information on this page, and things should become apparent.
Sending friendly reminders
You should always include a payment timeframe on any invoices you send. In most instances, that will be fourteen or thirty days. When companies fail to pay within that period, you need to send them a friendly reminder. Let them know you’ve extended the payment date for another week, and hopefully, they’ll release the funds. You should always try to speak to someone directly rather than sending emails. That way, you know for certain the other party has understood your message. If they still refuse to pay, you can get slightly more aggressive. However, the last thing you want to do is sever ties with the client.
Arranging debt recovery
If the client still refuses to pay after you’ve sent two or three reminders, you might like to organize debt recovery. There are many different routes you can take, and some will make more sense than others. Modern business owners often decide to cut their losses and sell the debt to a recovery specialist. In most circumstances, they won’t pay more than 30% to buy the credit. That means you lose 70% of the money you would have otherwise received. However, it’s better to lose a dollar than ten, right? The recovery experts will then put measures in place to obtain the full amount from which they will make their profit.
Getting invoice financing
People who don’t wish to sell their client’s debts have another excellent option. There are companies out there that offer invoice financing loans. Business financing for invoices enables you to get the money you’re owed without recovering the debt. The lender will take a look at your outstanding invoices, and then offer cash based on their value. Other factors come into play here too. For instance, your business revenue and credit score will play significant roles. You can often get better deals if your company is still making a profit elsewhere. However, invoice financing can almost eliminate any cash flow problems you might face.
While that information is pretty basic, it covers all your options when clients fail to pay. Of course, there is no limit to the number of times you can send reminders. So, you should never sell the debt unless you’re 99% certain the company won’t send the money. You’ll lose the client for good, and you might build a harsh reputation. At the end of the day, many businesses require flexibility. You don’t want to cut off your nose to spite your face.