In Show 044 – the Debt Recovery Process originally broadcast on Facebook Live on Wednesday 20 December 2017 we explore this interesting topic.
Today on the show we are going to continue our conversation about debt recovery. This conversations fits nicely into Phase 3: Initial Clients. The reason is simple. Without paying clients you don’t have a business. Cash in king when running any business and if your cash flow is too low you risk shutting down. We always recommend that you get paid up-front. That isn’t always possible however. That’s when debt collection becomes absolutely critical.
Whenever you’re providing goods or services ahead of time you have to create an internal debt collections process. You should have a specific staff member tasked with carrying out the debt collection process. If you follow a regimented process delinquencies are going to decrease and that means more money for your business. That process should include the following steps:
- Send an invoice with the expected date of payment
- Then in the event of non-payment send a second letter requesting payment
- If payment still has not been paid a phone call requesting payment should be made
As part of your team you should have a professional in the debt collection industry. Having someone with some expertise is really important to ensure payment. Outsourcing this kind of work is going to be more effective and is going to save you a lot of time in the long run. The details of how the debt collection process will work should be detailed in the terms of service portion of your contracts.
The debt collection guidelines in Australia detail how this process should take place. The guidelines are quite broad and you should seek a lawyer before crafting your policy. There are rules around contacting a debtor. You have to have a reasonable belief that the method you are using to contact the debtor is the correct one. It is also illegal to make contact with a debtor by falsifying your identity. You have to be who you say you are. You also have to make contact at reasonable intervals. You can’t call them 15 times a day. These rules are in place to protect people from over-zealous debt collectors.
The rules around debt collection are incredibly important. You don’t want to fall afoul of the ACCC. Getting your debt collection process in place early on is hugely important for the future success of your business.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.