Every business wants to reduce their debt while collecting on debts that are owed them. This is the ongoing struggle in the business world; it’s crucial to have debt managed effectively in order to be able to meet monthly expenses and keep operations moving forward.
To accomplish this, it’s important to come up with a doable debt management plan. Here’s how to develop such a plan in a way that it serves as a win-win for everyone involved.
Determine What You Owe Others
It begins with you. How much do you owe other companies? Figure out your debt load (this is something your balance sheet can tell you) and start taking steps to pay down this debt. This may involve contacting the businesses that you owe money and negotiating lower interest terms or longer repayment periods.
Not every company will be willing to negotiate with you, but some will. They would rather reduce rates and extend collection times than not receive anything at all. And traditional debt collection agencies can be pricey! You might be pleasantly surprised at how many companies actually are willing to negotiate with you.
Figure Out What They Owe You
Do other companies owe you money? Reach out to them. Go through all the invoices you’ve sent out that haven’t been paid yet, and create a list of the companies that owe you money, along with how much they owe you.
Next, start contacting these companies. Ask when you can expect to receive payment for these overdue invoices. You may get a range of responses, including the following:
- They are ready to pay: In the best-case scenario, your debtor agrees to pay you right away. Don’t be shy about asking when to expect to receive the payment (and follow up with them if you do not receive the right amount by the specified date).
- They would like to negotiate terms: Especially if you’re in the same boat (see our first section above) and you’re trying to negotiate better terms with companies that you owe, be as flexible as possible with those who owe YOU money and would like to negotiate different repayment terms.
- They tell you it was a rough month and they need more time: Try to give them an extension, if possible. But stick to the new date (don’t let things slide indefinitely).
- They hang up on you: When they’re not even willing to talk, you have to bring a third party into the equation.
You rely on getting paid on time for your operations to flow smoothly. You have obligations, including rent to pay for your business space, employees who rely on regular paychecks, suppliers who keep you stocked, and so on. In order to be able to pay them on time, you need to receive your payments on time, too. Don’t ever feel guilty about following up on your unpaid invoices and asking for payment, but do try to work with your debtors (just as you’d want companies to work with you when you owe money).
Come Up With A Workable Repayment Plan
After you’ve contacted entities waiting on payments from you, and companies that owe you funds, you can come up with (and adjust) a workable repayment plan. This may involve additional calls and negotiations to come up with just the right income flow so that you can collect enough from your debtors to pay back your creditors. It’s a tricky balance, but with careful planning, it can be done!
Pay As You Collect
Part of this repayment process is to make sure that you reserve some or all of that incoming money to pay back what you owe. As overdue invoices are paid and money comes in, review your repayment plan. Which of your outstanding invoices do you need to tend to first? Be intentional about paying back your creditors as money comes in, and soon you’ll find yourself with significantly reduced debt. Maintain a disciplined approach, and you may even be debt-free before you know it!
Reduce Expenses And Future Debt
It’s not just about finding a good balance between what you owe and what others owe you. Debt management is also about taking a good, hard look at your expenses and finding where you can cut costs. By reducing your expenses now, you will be in a better position to cut down your future debt, helping to assure the longevity of your company.
For Those Non-payers
There will be times when, despite assurances of repayment, you won’t see that promised money come in. There will also be times when your debtor refuses to even talk to you. In these instances, you may have some possible recourses.
An effective approach is to post your debtors publicly. In other words, tell the world who owes you money! This visibility can be an incredible incentive for your debtors to buckle up and pay. Even just the threat of going public is enough, in many cases, to collect on those unpaid invoices.
Contact Paysco For More Information
Our company is in the business of debt collection, but not in the traditional way. Instead of being a debt collection agency, which usually charges a considerable amount in terms of fees, we are a B2B debt recovery alternative.
Paysco’s approach is to turn unpaid invoices into public knowledge. If a company appears on our site repeatedly (or even once), other companies will think twice about doing business with them. Our approach is both affordable and effective; it really works!
Want to learn more? Get in touch with us today! We’ll be happy to explain how everything is handled. We hope that you, too, will see the benefit in this novel way of facilitating debt settlements.
In a very real sense, Paysco is a credit bureau crowdsourced by small businesses. We understand that you don’t have the funds to pay expensive debt collection agency fees. Our approach is affordable (in fact, for a limited time, it’s completely free!), and we are proud to be able to provide this valuable service to small business owners. Get started by contacting Paysco today!