Getting Paid (Part 4)

December 2, 2009

What can you do if you simply cannot get paid by someone who owes you money? In the first instance, learn from your mistake. Review your systems and update the, find out what went wrong and make sure it doesn’t happen again. The other options are usually far less successful. You can go the legal route but remember if they don’t have the money or the amount is very small then the reward may not be worth it. Solicitor’s letters cost you money and after a while mean nothing. As a rule the first solicitor’s letter a person receives gets their attention. However, once you have received a few solicitor’s letters the impact dwindles and people take far less attention to them. It also may cost to take the person to court and you never really know how a judge will rule in these matters. You should do a cost/benefit analysis of taking the legal route as it doesn’t always generate a great deal of money for you, but it will for the solicitors.

Similarly, debt collectors also cost money and they can do nothing more in reality than you can do yourself. If you are operating on a small margin then you are not likely to make much money through debt collectors.

In many countries you can claim back VAT, if registered, on bad debts and you can then write off the remainder as a bad debt for tax purposes. If the debt is current then you can issue an internal credit note to make your accounts look better, but you still will not get paid. This should not be done often as it looks bad on your balance sheet after a while.

So to conclude:
• Good debt control = good administration = good cash flow
• Tight administration leads to lower levels of late payments
• ‘He who shouts loudest’ gets paid. Those who are first in the queue get paid where those who are second get little.
• Paperwork and procedures are the key ingredients of a good payment system
• Check out new clients
• If they get behind, don’t do further business with them
• And remember, its your job to get paid your money

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