It is hard to believe but Australia has the reputation of being the slowest in the world at paying outstanding invoices – even worse than Mexico, South Africa and the United Arab Emirates. Even more surprising, numerous European counties – including Switzerland and Germany- actually pay their invoices early! The average time it takes for an invoice in Australia to be paid is 26.4 days past the due date. Continual late payment of invoices adds financial and administrative costs, reduces the potential for investment opportunities, damages business relationships and fuels business uncertainty according to various discussion papers published by the Federal Government.
So why aren’t Australian businesses ‘taking a stand’ and engaging debt collectors when invoices are overdue? Australian businesses have been reticent to engage debt collectors for various reasons – most of which are not valid. So what are some of the reasons?
1. You think the debt is too difficult to collect
You assume that because you have not been able to collect the debt that it is not recoverable. However, debt collection firms are specifically trained for the recovery of these types of debts. This is what they do every day. They apply techniques that have been proven to be successful over many years. With some firms (including Brodie Collection Services) offering a ‘no collection, no charge’ policy there is really no reason not to engage a debt collector for amounts you cannot recover.
2. You don’t want to lose your customer
Your customer may have some outstanding debts but you are afraid to engage a debtor collector in case you lose them as a customer. Most modern day debt collectors take a professional and ethical approach to collecting a debt. However it does pay to take your time to make sure you are comfortable with the debt collection agency you have engaged to chase your debt – to make sure they align with your own business values. That way they can send an effective message when it comes to customers who are late paying their invoices. It also needs to be remembered, it can sometimes be better to lose a customer than to sell goods to a customer and not get paid – as you will still need to pay your supplier.
3. You think debt collectors are too expensive
As long as you use a debt collector that has a ‘no collection, no charge’ policy you will always be better off using a debt collector. This is because if the debt ends up not being recoverable you do not owe anything to the debt collector. However, if the debt collector is successful your fee will generally only be percentage of the debt recovered. Compared to not being paid at all, this is a great outcome.
4. You are just too busy
If you are too busy to chase your debtors then it is really time for you to engage a debt collector. Given that most small businesses fail due to lack of cashflow it is important that you stay on top of this important task. Once you provide the debt collector with some basic information on the invoice outstanding they can take it from there – giving you more time to focus on other aspects of your business.
5. You think debt collectors are only for big companies
A lot of people think that debt collectors are only for big companies. This is partly true – as some debt collectors really only work with big companies. However. there are some debt collection agencies (like Brodie Collection Services) who only work with small and medium companies. These types of debt collection agencies will understand your needs better – particularly when it comes to the impact a non paying debtor has on your cashflow. For example, they may be able to negotiate instalment payments so that will help get your cash flow moving again.
Brodie Credit Control Solutions provide reliable risk assessment solutions for small and medium businesses – including customised commercial credit application forms. Visit www.brodiecreditcontrolsolutions.com.au to find out more about the credit control solutions that are offered by Brodie Credit Control Solutions or call (03) 9889 9977.
This information provides a general summary only and is not intended to provide specific advice for your individual circumstances. It is not a substitute for professional advice and should not be relied upon as such.