Regardless of industry or sector, a lot of small businesses are facing an increasing amount of unpaid debt. This is often due to late and ignored invoices, and it can cause huge problems in regards to cash flow and keeping afloat in uncertain financial times. Though you might be able to handle one or two slightly late payments to begin with, even the most successful of businesses eventually start to struggle. Thankfully, small business debt collection is an option and there are a range of ways to approach it.
As a business owner, you can attempt to recover unpaid debts yourself, or you can enlist the help of a debt collection agency. Below, we have explained the ins and outs of the small business debt collection process.
How Does Small Business Debt Collection Work?
One of the first things that you should do when someone owes your business money is chase them. This means sending letters and emails to remind them of the outstanding balance, and reminding them of what needs to be paid. This should start with a friendly reminder, and move onto more formal requests if the problem persists. If these efforts are ignored, more onto making contact over the phone.
It’s important to open the lines of communication, as this could help you to understand why the invoices haven’t been paid. Though it’s no excuse, you might find that the debtor is having cash flow problems themselves, and they are waiting for funds to clear. If you do manage to make contact, try to reach a solution that you are both happy with. For example, you could agree to a payment plan or extend the deadline of the payment, on the understanding that a payment will be made on an agreed date.
Remember, though debt recovery can be complex, late payment legislation is there to help you. It gives you the right to claim interest and compensation for late payments, which is often enough to encourage a debtor to pay. The interest is calculated as 8% over the Bank of England rate for business to business dealings, and late payment charges vary depending on how much is owed, ranging from £40 to £100.
Professional Small Business Debt Collection Services
Of course, there is no guarantee that a debtor will pay, even with additional charges and multiple reminders, and many don’t take the efforts of a business owner seriously. If this is the case, it’s time to move onto professional debt collection services.
If you are struggling to handle small business debt collection yourself, you can hand things over to a team of experts. At Cobra Financial, we provide a wide range of debt collection services, and we specialise in unpaid debts owed to small businesses. It doesn’t matter which sector you work in or who owes you the money, we will help you to reclaim funds that are rightfully yours. Contact us today to find out more.