Five Ways to Protect Your Startup from Bad Debts this New Year
New year, new business moves!
At the beginning of each year, most businesses set their goals and put the Killer strategies in place and we are hoping that you’ve done yours too.
To start you off, here’s a guide to avoiding bad debts this year. Yes, bad energy needs to stay far away.
1. Research on your Customers:
The credit worthiness of a potential customer is key to ensuring bad debts are avoided ab initio – from the very start of a business relationship.
2. Ask for an Initial Deposit:
Include getting paid an initial deposit as a term and condition for your services or sales to reduce the risk of not getting full payment. A customer who pays a substantial amount as a deposit is more likely to pay the rest as he or she has already invested in that contract .
3. Set Clear Payment Terms and Conditions:
You must have a contract of sale in place before processing a sale of your goods or services. You can engage the services of a lawyer to help you draft one.
As a startup owner, ensure the terms of payment, as well as preferred payment method is included in the contract. Also make these terms visible on your website and send a copy with your goods and invoices.
You do not want this area of your pre-sale to be ambiguous or unclear, or it might lead to bad debt. Communicate the dates, channel and frequency of payment as clear as possible to avoid stories that touch in the future.
4. Use Technology to Record your Payments:
Tracking your invoices and due payments is another key way to ensure your debts don’t go bad. Technological tools that help you track payments make sure you don’t lose track of a due payment or let such go unrecorded due to human error.
Accounting apps such as the Wave app allow you create and track invoices, payments and scan receipts so as to reduce the risk of improper invoicing or recording of payments.
5. Put a Phone Call Through when an Invoice Becomes Overdue:
Phone your customers when their invoices become overdue, as routine letters tend to be ignored. A diplomatic approach generally works best, particularly when you want to have a continuing relationship with your customers.
And as a bonus: Hire a great lawyer that helps you set needed legal boundaries that minimize bad debts this new year.
Engage one right on DIY Engage.