How does it feel when someone OWES you money and they refuse to pay. Not great right?
They DRAG out payment, then they come up with all manner or EXCUSES not to pay and then they start attacking you, your company and your integrity all the while you’re doing exactly the SAME in return.
Bad Debt becomes EMOTIONAL and that needs to STOP.
When emotion kicks in so does IRRATIONAL behavior which often does more harm than good.
EVERY business encounters bad debt at some point (some more than others) so I have put together a few procedures to consider to help reduce the insidence of Bad Debts occuring and also help TAKE OUT the emotion:
- Do a credit check on new clients BEFORE you extend them credit (Banks do, after all you are effectively loaning them money).
- Have and ENFORCE payment terms.
- Have a formal COLLECTION procedure with DISTINCT next steps so debt does not drag out.
- Get clients to APPROVE work in writing preferably with a formal purchase order BEFORE you commence any work.
- Get IMPORTANT communication exchanges in writing e.g. via email so you AVOID the “he said, she said” arguments
And here are a few other things to consider:
- Do your work WELL and in a TIMELY manner
- COMMUNICATE with your clients regularly especially if things are changing.
- Ensure the PERCEIVED value the clients are getting is higher than THEY believe they are paying for.
- Deal with people with RESPECT and INTEGRITY at all times.