Credit is beneficial for most business operations because it promotes the purchase of more goods by customers. However, unpaid debts can quickly become a burden for your small or growing business. In simple terms, if you provide goods or services without getting payment, you will eventually have problems with cash flow. Therefore, you must have some stringent credit management policies to protect your business against losses and bad debts. Here are some basic but practical guidelines to help you reduce unpaid company debts.

Charge for Late Payments

You should think about preventing the occurrence of unpaid debts by discouraging late credit payments. Ideally, you should impose a penalty on customers who choose not to send their owed funds on the expected date. The most effective method is adding an extra fee for late payments. You should advise the clients purchasing on credit that delayed debts will attract an interest or a recovery charge for the debt. This policy will deal with customers who intentionally delay payments by creating significant financial consequences. Also, this practice sends a strong message to the customers that you have a strict crediting scheme in your company, discouraging delinquents.

Take Immediate Action

Customers will delay their payments if they do not feel like your company takes debt recovery seriously. Also, some forget the deadlines imposed on their debts. Therefore, you should not let the proverbial sleeping dogs lie. Instead, take immediate action starting on the day that the payment is due. You should contact the client on the final day for the unsettled credit agreement. Find out the reason that the debt is still outstanding and encourage immediate payment. In general, debts are harder to recover if delayed because customers do not have a sense of urgency. Therefore, never delay your collection efforts.

Follow the Legal Guidelines

You should be persistent in your efforts to obtain your payment from your customers. However, you should be aware that the ACCC has some legal guidelines on debt collection. The regulations are designed as part of consumer protection to prevent harassment and threats. If you violate the outlined rules on handling debt recovery or use banned practices, you could end up in trouble with the law. Learn the restrictions on your credit management activities and follow them.

Finally, you should consider hiring a professional debt recovery contractor to help you deal with long-term unpaid debts. This action will free up your workforce to deal with your core business functions while increasing the rate of cleared credit.