Post X-mas business Cashflow Crisis? Get cash now! Call in Your Debts
One of the most effective ways to deal with a cash flow crisis is to call in your debts. Only downside is this typically involves picking up the phone and speaking with your debtors in person. And let’s face it, calling debtors is not the most enjoyable task. But there are some simple steps you can take to steel yourself for any unpleasantness and ensure your effort pays off.
Step 1 – Get Prepared
If you’re planning to call up debtors, it helps to prepare yourself for the task. The better prepared you are, the more commanding you will sound and the greater the chance your call will result in immediate payment. So make sure you have all the relevant information to hand, such as the correct phone number and contact name; the amount outstanding; how the debt was incurred; the date of the last payment; how many attempts have already been made to collect the debt; and so on.
Step 2 – The Call
Before launching into the details of the debt you are calling about, be sure to double-check you’re speaking with the correct person and that he/she is aware of who you are. Once that is established, you can outline clearly and professionally that you’re calling about an outstanding payment. It’s easy to get emotional when talking about money so try to stay as calm. There’s no harm in listening to what he/she has to say but you definitely don’t want to get drawn into a long-winded argument or moralising session. So stay on topic, keep the conversation as brief as possible, and don’t be swayed from your quest to recover the payment owed. Also don’t be afraid to use the power of silence to your advantage. A heavy pause at the end of your conversation effectively “puts the ball” in your debtor’s court. For example, if you conclude your call by saying: “I need your payment no later than the end of this week,” follow through with a palpable silence. It is a powerful – but perfectly polite – way to convey you mean business.
Should your call go directly to voicemail, you can leave a short generic message but it’s usually best not to reveal that you’re phoning in regards to an unpaid debt.
Step 3 – Settling The Debt
Once your debtor has conceded he/she does in fact owe you money, don’t be afraid to ask your debtor to settle the outstanding payment in full. As your goal is get the debt paid as quickly as possible, be prepared to accept a credit card payment over the phone. If this is not a feasible option, be sure you get a solid commitment from your debtor as to when payment will be made. And follow through by documenting this payment date commitment in an email or letter.
Should your debtor’s circumstances be such that he/she can’t immediately settle the outstanding debt in full, be prepared to work out a payment plan. Offering to split the debt into two instalments with mutually agreed pay-by dates, is a good starting point. It’s also more effective to negotiate weekly or bimonthly instalments, as opposed to monthly instalments. This helps to keeper a tighter control on the payment schedule and get the debt paid off more quickly. And it goes without saying that the quicker your outstanding debts are settled, the healthier your cash flow will be.
Sending Out Reminders
Sending account statements and reminders via email or SMS can be useful to prompt action from debtors who are behind in their payments. If your using Xero accounting software you can also set up automatic reminders. And while SMS reminders have proved to be a more successful communication route for prompting payment than email, phone calls are even more intrusive and typically get even more immediate results. There are also other software options that can connect to your Xero file and assist in automating debt collection, imagine sending out collection letters in a few minutes each week instead of hours. Contact the office and we can discuss whether these may be suitable for your business.
So when the going gets tough, it’s time to get prepared, investigate electronic options to automate debt collection, and if required, pick up the phone and call in your debts.
Want to learn more about managing your cash flow? Contact SMART Business Solutions today for more in-depth guidance on how to effectively handle your debtors.
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