Owed Money You Can't Collect? How Your Small Business Can Get Paid Faster

Is the cash flow of your small business suffering because you are owed money you can't collect?

If the answer to that question is "Yes", then you're not alone.

I receive a constant flow of letters from small business owners whose livelihoods are threatened by late payers. Here are a few examples:

"...I am a small business owner who is struggling to pay my bills. Not because I can't get clients, but because my clients won't pay me on time. I just don't know what to do."

"My biggest customer is making me wait more than four months before they pay me. I just cannot afford to go on without the money I am owed."

"...I have been in business for more than twenty years....late payment is a bigger problem now than it has ever been."

"...I just cannot collect the money that I am owed."

"Late payers are ruining my business."

Are any of these comments familiar to you?

If so, don't panic!

You have a number of options open to you.

You could decide that the money owed to you cannot be collected. If so, you could write off the debt. But that would damage your business. There isn't a business that couldn't benefit from more cash in the bank.

You could hire a debt collector to collect the debt for you. But these services are expensive.

Or you could collect the debt yourself. It is not difficult to master Credit Collections skills. The task requires no special skills - just an ability to learn a few simple tasks and a lot of common sense.

I started out with no idea how to control credit or collect debts.

Before I took a job as a debt collector, I assumed that credit control would be an unpleasant job: one that would be unsuitable for me.

But, at that time I was desperate. I was a failed salesperson with few prospects.

I had no cash in the bank and holes in my shoes. I needed a job...any job. I was desperate. I determined to accept the first job that was offered to me. It just so happened that the only job I was offered was in credit control.

I began with zero knowledge. But I could not afford to fail. I had to learn quickly. And boy, did I have a lot to learn!

I didn't know how to begin a conversation with someone who owed money. Nor was I knowledgeable enough to end the call properly. I was uncomfortable 'asking for money'.

I did not understand payment terms. Or even know what a credit limit was!

But I began my credit career with a determination to learn and be as good at the job as I could be.

I started poorly and made many mistakes. In those early days I lacked confidence and was easily discouraged.

I seemed to collect only the debt that was deemed 'easy' to collect. The tough cases always seemed beyond me. I saw others excel while I struggled.

I withdrew when a customer disputed that the owed my employer anything.

And I was constantly fearful of being screamed at by the client.

I was naive too. I usually believed the customer when they promised to send payment. I didn't know how to ensure that the cash would be sent as promised. I still recall the sense of disappointment when promised payments failed to appear.

But I learned quickly. I made notes of my conversations with customers. I analysed the difference between the successful calls and the failures. I took a note of the strategies that were successful and those that failed.

I experimented. I realised that credit collections is about selling. I sought to persuade the debtors from whom I was collecting that it was in their interests to pay me. The benefits of them making payment far outweighed the losses they would incur by withholding payment.

And slowly, I built my own collections system. I started to tackle those tough cases that had so far defeated me. I still remember my sense of elation when I cracked my first big case. I made a photocopy of the cheque and stuck it to my desk.

My confidence grew with each success. I transformed myself from a timid collector who expected to fail to a high performer. I took pride in myself. My self esteem multiplied. And for the first time in years, I felt good about myself.

Soon I became the top collector in the company. I collected more than anyone in the history of the firm. I was given only the toughest cases. I collected millions of pounds in debt that was consigned for write-off.

I got results because I was consistent. I used a tried and tested system. My colleagues could not match me because they were inconsistent. They acted haphazardly.

I found that it IS possible to collect debts that were thought to be 'uncollectable'. My success got me promoted. Indeed, within 4 years, I was a Senior Manager with one of the biggest brand name companies in the UK.

If I can learn to collect money owed, then so can you. In fact, anyone can become a proficient debt collector.

ANY business - no matter how small, can develop an exceptional Credit Control and Debt Collection system and reap massive benefits from that system.

So, what are the must-have ingredients of an exceptional system? It's not rocket science.

Firstly, you need to be sure of your customer. Are they who they claim to be?

Next, ensure that your trading terms protect your business. This means that they must be legal whilst providing you with the peace of mind that you need.

Third, calculate the risk that your client represents. Then limit the risk. This sounds complicated but requires little expertise.

Then take care to open new accounts so that you ensure that the client is creditworthy and capable of paying their bill.

Fifth, become a proficient cash collector. Do so and you will be able to persuade debtors to pay you. This is a skill that will look after your business forever.

The next step is outsourcing. Learn to use Debt Collection companies, lawyers, credit insurers and factoring companies only when you need them. Use these services too early and you pay for the collection of debts that you could have collected for no fee. Hire these services too late and you will be wasting your time and money.

Finally, monitor performance and seek to improve constantly.

Each of these steps is vital. None should be omitted. Each part of the system dovetails with the next to produce a seamless process that will protect your cash flow.

Take each of these steps and you will be able to get paid faster, slash 'bad' debts and benefit from a stronger cash flow.

And your business will be stronger because you won't be owed money that you can't collect.

Article by Nick Balich, author of 'The Ultimate Credit Control System', THE resource for small business owners who want to get paid faster. To learn how you can improve your cash flow, slash bad debts and increase the profitability of your business go to: http://morecashmoreprofit.com