Risk being refused funding
Unless your company has the balance sheet of Apple, you'll likely need access to capital through financing at some point. Even large-cap companies regularly seek capital injections to meet their short-term obligations. For small businesses, finding a suitable financing model is vitally important. Get funds from the wrong source and you risk losing part of your business or finding yourself locked into repayment terms that hurt your growth for many years. But before you embark on this journey, there may be less risky and immediate ways to balance your finances. The first problem to tackle is unpaid debts, as this can lead to a series of different problems that financing can only make worse instead of fixing. Here are some problems that not collecting debts can cause for your business.
Recovering your dues, a necessity for every entrepreneur
Owning an SME or VSE is a rewarding experience, but it comes with a mountain of challenges. Often, some of these challenges arise when it comes to getting paid. Debt collection is an important and vital part for any business. It may not be glamorous or even uncomfortable at times, but the dangers of not collecting owed debts are far greater than a few difficult conversations or calling in a collection agency.
The risks of not recovering your entire debt
Time is the most important factor when collecting debts. The sooner the collection process begins, the better chance you have of receiving the full amount owed. After just a few months of non-payment, you will only get back around 75% according to debt recovery statistics. Go unpaid for 6 months and there's a good chance you'll only recover half of the original debt. Hurry up.
Damaged business relationships
Obtaining a new client takes time and money. Losing one due to late payments is a danger, but one you can hopefully avoid. Before sending your unpaid debts to a collection agency, send your reminders and communicate effectively with your customers. Let them know the risks involved in non-payment. Since you value them as customers, things should be taken care of as soon as possible. By communicating effectively and working with your customers as they face a difficult time, you will strengthen your relationships for the long term.
Cash flow and projections
The turnover is calculated several months in advance based on projections. This projected cash flow is often already allocated elsewhere to help your business grow. When customers don't pay their invoices, it affects the entire operation of the business.
Being too nice
When a customer has problems paying their bills, they often prioritize the ones they consider more important to pay over others. The debtors talk to each other. If they know that your company is not responsive in monitoring its late payments and does not forward its unpaid debts to collection, they will not put you at the top of their priority list. Don't fall into the trap of being too nice, of becoming the joker. Business is business. Be confident and claim your dues.
Never get paid
Getting started on collecting your unpaid debts as quickly as possible is the best way to avoid late payment and non-payment habits. If it is not followed, a debt can fall into oblivion and even become time-barred (after a few years, depending on the country) and you will not be able to recover it. To avoid these risks, quickly opt for a collection agency. There is a chance that you may not receive full payment of your debt, but what's taken is taken.
A debt collection company offers a business many benefits. It can take care of the entire debt recovery process, freeing you and your team to focus on managing and growing your business. Since 1993, INTERNATIONAL RECOVER COMPANY® has supported companies in managing the delicate process of debt recovery.