What to Do if Your Business is Owed Money

If your business is owned money, you may be at a loss of what you can do to get paid. While having debt collectors do the work chasing up your customers or clients may sound appealing, they do come at a cost and usually only take large debts on their books. This leaves it down to the individual business to do the chasing themselves, but what should you do?

Today we're exploring all business debt recovery options plus some tips on how you can improve the likelihood of getting paid on time in the future.

DIY Business Debt Recovery

It is best to approach the customer or client who owes you money as early as possible, making the decision as to how long to wait based upon your payment terms and conditions. Generally this will be over the 30 day past due date mark. This is because it is easier to get late invoices paid early on, rather than waiting for a few months before seeking payment.

But it can still be very awkward following up unpaid invoices. Having a plan can make this someone easier, and you could try:

  • sending an email or letter outlining the overdue invoice and asking for payment within seven days
  • send a past due invoice or statement of accounts to remind the customer
  • pick up the phone and give them a call
  • stop further credit being given until they pay their debts
  • hiring a debt collector, going to the Disputes Tribunal or contacting a lawyer

Hiring a Debt Collector

A debt collecting agency  works by either buying the debt from you, where they'll collect it for themselves, or collecting it on your behalf. Both of these options are likely to come at a cost for you, with a commission paid to the collector, unless your T&Cs state otherwise. It may be an option for you to hire a debt collector if:

  • you have tried approaching the debtor yourself, but have not had success in getting paid
  • you want to avoid undertaking any legal proceedings to get paid
  • you want the debt settled quickly and efficiently
  • you do not want to do the debt chasing yourself
  • you need a solid paper trail stating what was done to chase the debt to take legal proceedings in the future
  • you want details of seeking the payment for your audit and accounts
  • you'd rather focus on growing your business 

There are many debt collection agencies in New Zealand. Some specialise in particular industries or types of debts, with others having minimum debt values they will work to collect. A personal recommendation from another business owner is one way to identify possibilities to investigate, or a search of Google will bring up lots of additional options.

Getting Your Invoices Paid On Time

While this advice is unlikely to help you get paid now, some of these tips could be very useful for the future:

  • ask for full or part payment before the delivery of the service or products
  • have clear terms and conditions regarding credit and invoice payments
  • credit check your customers or clients first
  • have them sign a contract before they are given any credit
  • invoice immediately after they have made a purchase or you've completed a service
  • keep very clear records of what they owe and due dates
  • contact the debtor immediately once payment is overdue

For advice on other aspects of running a business, take a read of our every growing list of Business Blogs - and don't forget to add your business to our NZ only business directory! 

Posted: Friday 10 December 2021

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