If you are in business you are sure to have had at least one client who owes you money- probably more than one. This can quickly turn your cash flow into more of a cash dribble and can ruin your business. So what can you do once it becomes obvious that despite promises, extensions and payment plans you still haven’t got paid? Here are 5 tips on reclaiming your debts: 1. You need to decide if you want to pursue the debt or write it off. Pursuing a debt half-heartedly is likely to produce a half-hearted response. We find that a firm but clear letter of demand that attaches a draft Statement of Claim can make your debtor sit up and pay attention to their debt.
2. If the debtor still does not pay then you can immediately file the claim, claiming the amount they owe you, and, some interest and legal fees for good measure. If the debtor doesn’t file a defence within 28 days from when they are served with the Statement of Claim you can have a judgment entered against them. If your debtor wants to pay you at any stage its worth engaging in some discussion about your fees- but realistically, if you have had these discussions in the past and you didn’t receive any money from them, it likely that the debtor’s attitude hadn’t changed much. Once you have a judgment you will find yourself in a better position to negotiate for payment of your fees or the debtor will risk having that judgement enforced against them or their business.
3. It is important your business has a great accountant who can work with you proactively to reduce your debtors. But don’t leave everything up to the accountant- know who your debtors are and how much they owe.
4. You need to stop supplying the debtor allowing them to increase the amount they owe you. Although easier to assume that if you keep the relationship going you have more of a chance of getting paid, ask yourself “do I want to work with someone who doesn’t pay their bills?”.
5. As with many things in life, prevention is better than a cure. It is surprising how many businesses do not have any written terms and conditions that deal with deposits, payment terms and ways to protect a business against debtors, especially ones that become bankrupt or liquidated.
We can help you chase up debts, making those awkward calls you keep putting off and act fairly, but firmly, with your debtors. We can also work with you to put in place strategies to keep your amount of debtors down to a manageable amount, including preparing terms and conditions.
Talk to Coutts about how we can work with you to make sure debtors don’t dry up the cash flow you worked hard to create.
Call 1300 268 887 your first consultation is free.