Dealing with debt: How to get it right from the start
There is a lot to think about when you start your business. Cashflow, premises, getting the right accountant and hiring staff all have priority. It is a complicated and stressful time and can take up much of your thought processes as the owner or manager. This might explain why the issue of dealing with debt often comes as a final thought. Or worse still it is simply dealt with when the first customer fails to pay.
The payment dilemma
I recently talked to a group of veterinary practices, some of whom were struggling with the concept of dealing with debt when they had to consider the welfare of the animals they cared for. After all, the veterinary oath makes it very clear that they should not inflict harm on any animal by denying treatment. Putting the animal first is important – but so is your business and thinking ahead could prevent these kinds of dilemmas from the outset.
This fundamental failure to think about how your business will deal with failures to pay your invoices will ultimately lead to problems down the road. You could have extra costs associated with court proceedings and collection costs, or you may simply find that your customer relations are affected in a negative way.
How to deal with debt at the very beginning
Procedures – First, put rules and procedures in place that are used consistently with every customer and by every member of staff. Second, design a step-by-step checking procedure that all credit customers are put through and must adhere to. Third, hire the right person to deal with issues of payment and debt. This one point of contact makes the process more smooth for all concerned.
Communication – Talk to your customers either directly or via your email or brochures to convey to them the importance of paying their bills on time and the consequences if they fail to do so. The clear step-by-step approach highlighted above will help you to show that you really mean business. Explain what customers should do if they think they will have trouble paying and have alternative payment structures in place for these situations.
Action – If the worst happens and your customer has not adhered to your payment rules you absolutely must start the step-by-step procedures to get your money back. Don’t offer leeway or special measures for customers. If you want to ensure that your business is not taken advantage of it is vital that all steps are followed to the letter of the law.
In summary, please make sure that your procedures are in place, you communicate them clearly and that you follow them through. It is simple and unambiguous – exactly what all business and customer relationships need to be.
I will be addressing each individual topic in a series of blogs designed to help you run your business even more effectively.
Director at Debt Solve UK Ltd t/a DSL