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Managing Your Debtors is Critical

One of the most important aspects in small business is the ability to get paid. But it can often be one of the hardest things to do. Here are some tips to help you out...

If your business sells products or services to other businesses then you may be in the position of having to extend credit to your customers. If you do extend credit then your business, like many others, may be having a hard time getting paid. And although no one really likes having to be the bad guy someone has to make sure that your customers are paying their bills. If they don’t then you may find yourself in the unenviable position of not being able to pay your own bills.

Are Your Customers Being Tight Fisted?

With the economy the way it is right now most businesses are trying to hold onto their cash as long as they possibly can. Most likely you are doing the same thing too. But once the job that you were hired to do or the product you supplied is delivered then that money they are holding really belongs to you. And as long as they have it then it cannot be made to work for you.

So Who Gets to Be the Bad Guy?

Well that depends on you. There are two basic options. Either you do it in house which, depending on the size of your company, might actually require you to do it or you can hire an outside firm. Each system has its advantages and disadvantages. In the case of an outside firm you get professionals in the collections business. The problem that can sometimes surface comes from the tactics they use to get your money. Often they will try to pressure a customer into paying their bill. This of course can be counter productive to your relationship with that customer. So if you are looking at using an outside firm then you need to question them first about the collection methods they use.

Doing Your Own Collections

If you are planning on doing it yourself or designating someone within your company to handle your collections then you need a system to govern your methods. To start you are going to need information. What is primarily needed is contact information. Phone numbers, addresses, and the person that it would be best for you to deal with. Once you have that information then you need to decide how aggressive you want to be in collecting your money. Most businesses allow 30 days for a customer to pay. If that is your policy then you need to try and stick to it. Because if you allow your customers more time then they may try to take advantage of you.

Preserve Your Customer Relationships

The most important thing to remember when dealing with money you are owed is that you need to preserve your relationship with the customer. If you don’t do that then all the effort you put into building that relationship will have been wasted. It even matters how well you treat their bookkeeper. Treating them well will help you in the future when the time comes again that you have to ask them to pay a bill. All you need to do is ask yourself what kind of a response you would give to someone that is rude or pushy when they are trying to get you to pay a bill. Keep that in mind when you want someone to pay your bill. Remember collections is a dirty job but someone has to do it.