Benefits of Debt Collection Clauses on Invoices
Getting paid efficiently for services rendered can be a challenge for many businesses. Oftentimes, delayed payments can be just a matter of misunderstanding and can easily be solved by having a professional and polite conversation with your customer or client.
As with most things, prevention is always better than having to remedy business issues.
If you are in a trade where you often have to deal with customers or clients who do not make timely payments, one of the most effective ways to getting paid on time is to take precautionary measures.
Setting your debt collection policy
Having a clear debt collection policy that is part of your service or purchase agreement will help deter delayed payments. Most importantly, you must take steps to ensure that your customer or client contract or agreement is legally enforceable.
In your fees and invoicing clause of the contract, be sure to set out the clear expectations of making timely payments and the consequences of delay. In this section, draw out the debt recovery process you will be entitled to carry out upon delayed payments.
By signing the agreement, your customer or client will be agreeing to these terms of debt recovery, which then entitles you to carry out the debt collection activities contained within the contract.
Typically, debt collection activities include:
- Making phone calls to customers or clients in request for payment
- Sending email reminders to customers or clients for overdue payments
- Sending an official letter of demand for amounts owed as a result of services rendered or delivery of goods
- Engaging a debt collection service to collect business debts
- Engaging a debt collection lawyer to pursue legal action to recover business debts owed
Include your debt collection clauses in your invoices
Although debt collection clauses are often found in the contractor or service agreement, having debt collection clauses on your invoices can be extremely beneficial in reminding the debtor of their legal liability to execute payment within the agreed timeframe.
Most often, customers and clients skim through contracts or aren’t personally aware of the debt collection terms contained within as businesses will typically leave the technicalities to the lawyers.
By having your debt collection procedure within your invoice, your customers and clients will be made aware of the debt recovery process and payment terms as agreed under contract.
To include your debt collection clause in an invoice, you could simply extract the exact terms from the agreed contract, or have them summarised at the bottom “notes” section of the invoice below the payment instructions.
How can I recover debt efficiently and cost effectively?
If you’ve tried all of the above precautionary measures but are still met with difficult customers or clients who owe money but aren’t making payment, it’s time to move onto other measures to recover your debt efficiently and cost effectively.
Engaging a debt collection lawyer can be costly and time consuming, and should be a situation of last resort with assessments made that the benefits outweigh the costs. Plus, debt recovery court proceedings can be difficult to navigate if you are unfamiliar with legal documents, procedures and attending court.
The common alternative would be to engage a debt collection agency to do the work for you. Debt collectors typically work on a commissions basis. This structure may become an issue as smaller debts are typically prioritised lower than higher debts, thus the debt recovery process may take more time due to a lack of transparency or correspondence - making it an impractical choice for smaller business debts.
The most effective way on how to recover a business debt is to do it yourself. With DebtForce, the one of a kind online debt collection platform makes it simple and straightforward to submit a debt and follow its process along the debt recovery stages. As this debt recovery process is more hands-on, you will be informed and notified of the status of your debt collection, with a clear understanding of timeframes and what to expect. Given that there are no upfront fees when using the DebtForce platform, costs are kept reasonable based on the debt amount.
Find out how DebtForce can help your business recover its debt today.