Have you ever found yourself in a situation where you’re reluctant to demand cash payments and are forced to allow debts to preserve clients? If this makes you uncomfortable, then you’re certainly aware that it’s a problem loading especially if these debts remain unpaid and eventually go bad.
Good cash flow is the lifeblood of any business. Bad debt on the other hand can cripple your business because it cuts off your cash flow. While completely doing away with debts in your business may seem impractical, we’ve garnered helpful tips that we believe could help you eliminate bad debt and maintain healthy cash flow and a profitable business.
Read on for some helpful tips:
Choose Clients Well
It is tempting to think that the more your customers, the bigger the profits. However, the wrong clients can cost you your hard-earned business success through bad debts. Therefore, before working with any client, assess their creditworthiness and look for possible red flags.
For instance, you can request M-Pesa statements or bank references. Carefully choosing who you work with will help you avoid falling into the hands of clients and customers who promise to pay their debts, but disappear.
Send Invoices as Soon as Possible
Do not postpone sending invoices to your debtors as soon as you loan them. Otherwise, you may miss the payment in case you forget to send them.
Additionally, if you send the invoice late, you may fail to catch up with the client’s schedule. Your invoice may get to your debtor after they have already made their payments, forcing you to wait for their next payment schedule.
Moreover, as you send the invoice, ensure that every detail is correct. Update the due date and address it correctly.
Stay in Touch With the Debtor
Communication is the backbone of any relationship, and your relationship with your debtor is no exemption. For this reason, after you loan your debtor, don’t forget to keep in touch with them as often as possible.
Send prompt reminders of their debt from time to time so that they don’t forget that they owe you. Some debtors may pretend to forget the loan if you are silent for too long. Therefore, until the debt is paid, do not hesitate to talk to your debtor as often as possible. You can even remind them of other services and products they can get from you as a way of keeping in touch.
Communicating with your debtor will also enable them to renegotiate their payment terms in case they are in a financial crisis.
Chase Payments as Soon as It’s Overdue
Chasing overdue payments can be a hard nut to crack, especially if you want to retain the client. However, ignoring these payments after being overdue is the first step towards bad debts.
For this reason, whether or not you have been in touch with your debtors, contact them and remind them that they need to pay your debt. Send emails, text messages, or call them to show how determined you are to collect the debt. Let the debtor know that you are willing to renegotiate the terms if they need to.
It could make it easier for them to pay you when they know that you are willing to give them more time rather than let this be a bad debt.
Ready to Walk Away From Bad Debts?
Bad debt is risky to every business and can be frustrating to an entrepreneur. Implementing ways to help your business survive bad debt will certainly make it easier to achieve your business goals. In case your debtor is still reluctant, regardless of your effort, consider working with professional debt collectors, and they will help you recover your debt as you focus on your business.
Sources: YoungMogul, marshallfreeman, debtrecoveries, dvphilippines, realbusinessrescue, stonegatelegal, growthbusiness, steadfast, matogconsulting