Biggest obstacles businesses face during debt recovery

Successfully running a business is an impressive feat and challenges can be frequent, and testing.

Yet through obstacles like these, business owners gain valuable learnings and insights into consumer behaviour, their market, and business in general.

One area where small businesses often run into hurdles is during debt recovery. Healthy cash flow is instrumental to running a successful small business, with the power to turn a struggling operation into a happy one.

In this article, we explore some of the biggest obstacles that New Zealand businesses run into when chasing their unpaid accounts.

1. Clear systems and expectations.

Small businesses are known for moving quickly to try and hit the ground running. Often this comes at the expense of critical details, such as setting up a clear and streamlined way of doing things that everyone in the organisation can follow.

Taking the time to create internal processes and communicate these clearly with your team will ensure everyone is singing from the same song sheet.

It is also important to build and clearly communicate your external policies with customers, such as payment terms and cancellation policies so that there are no gaps in the system, and everyone is clear and happy with the arrangement.

What can you do about it?

Take a moment to slow down and plan processes out – you don’t have to do everything at once.

Ask your team for their input – they may see things you haven’t considered and will be more likely to adhere to the policies if they’ve had a say in crafting them.

Engage a professional to draft your Terms and Conditions of Trade documentation. Something that is tailor-made to your business will stand you in the best stead when it comes to recovery of your unpaid invoices and can encompass everything from a credit application form to personal guarantees and indemnities.

2. Time management and resource.

Another common problem is not having the time to follow up on your non and slow payers, despite the best intentions.

It can be easy to procrastinate. The days and hours after a payment falls overdue are critical.

We should also remember that trying to do everything yourself is often not the most productive use of your time – You would rather be concentrating on getting work done.  If you are not adequately resourced for prompt recovery of unpaid invoices, now is the time to sort it out.

What can you do about it?

Carefully plan and build habits – assign a couple of hours every week to go through your outstanding invoices and act. Doing this regularly may also free up some time in your day.

Use the reminder notice automation in your invoicing systems such as Xero or MYOB or set up automatic calendar reminders for yourself to chase them up.

Use a professional – outsourcing to our resolutions team at EC Credit Control can offer a very nimble solution for your small business.

3. Difficult conversations with your customers.

It can be uncomfortable having tricky conversations about unpaid invoices, along with the added worry of “putting your foot in it”.

What can you do about it?

Upskill someone in the team on conflict management – there are often courses or workshops which can be found both locally and online. This training can lead to a greater feeling of confidence to hold these conversations, negotiate a result, and keep relationships intact.

Conversation preparation – consider how the call might go, what questions / points might come up, and plan a range of payment options before entering conversations.

Use a professional – we are experts at holding the trickiest of conversations and you can rest easy knowing your customers are in good hands.

4. Customers going out of business.

The reality is that your customers and their businesses may be declared insolvent without much warning. While customer bankruptcy is not an everyday occurrence, it is especially relevant to consider in the context of today’s economic environment and can be particularly painful if you have customers with large balances owing.

If this does happen, you will want to ensure your chance of recovering your goods and assets is as strong as possible.

What can you do about it?

Becoming a secured creditor is an economical and sensible decision to make.

Registering an asset on the PPSR enables you to become a secured creditor and recover costs owed in the event of your customer not paying, not returning, or misusing a valuable asset. It also ensures you’ll be in a stronger position of getting your assets (or the value of those assets) back if your customer goes into liquidation.

Use a professional – EC Credit Control can assist with all your PPSR requirements.

Now is the time to take care of these obstacles.

At EC Credit Control we are about looking at the whole picture and strengthening your systems and processes so you are protected.

We work with businesses of every size, from small business start-ups to established companies and large-scale corporates. No matter your operation, set yourself up to be a successful business by engaging the professionals.

Want to know more?

Our Area Managers are based throughout the country to visit you in person, in their virtual meeting room or by a quick phone call. Alternatively, you can call our customer service specialists on 0800 324 768.