If you have a construction business, you will need to establish a debt collection plan. Construction work is often done on a credit basis. In simple terms, the full payment will be delivered once the project is completed. Unfortunately, this model opens construction operations to problems with delinquent customers. If you do not have a reliable debt recovery strategy, you will end up losing money and experiencing cash flow problems. Here are simple tips to help you achieve the best results.
Send Formal Letters
You should prepare a formal letter to demand for payment if your customer does not pay their debt in time. It is advisable to send the letter as soon as possible. If you wait for too long, the other party might assume that your company is complacent about credit. Under ideal circumstances, you should use technology to manage the information on debts. A comprehensive database will help you avoid overlooking any debts.
When drafting a letter, you should realise that there are legal restrictions and regulations imposed on debt collection. Simply speaking, you cannot send a letter which can be construed as threatening. Failing to prepare a good letter can put your business in legal trouble. Therefore, where possible, you should have your lawyer prepare the formal letter on demand. They will use the right language to encourage payment without causing problems.
Consider Recovery Services
You should consider the benefits of using a construction debt recovery service. If you have a third-party collector, you will be able to protect your company's reputation more securely. Often, when business owners get involved directly in payment recovery, the situation gets out of control. For instance, as a contractor, you might not understand the nuances of collection. If you use the wrong method, you could compromise your business. A debt collection service will ensure that you are compliant with all relevant laws. In addition, you will be able to retain more customers if you are not the direct collector.
Provide Multiple Payment Options
One of the common excuses for late payments is the unavailability of a delinquent customer's preferred method of payment. Therefore, you should protect your business against this issue by providing multiple options for making the payments. You can also prevent the use of excuses by imposing an interest rate on late payments. If your customers realise that late payments mean a larger sum, they will be less likely to withhold your dues for your construction work.