What is outstanding debt?
Basically, every time you sent out an invoice to a client or customer for a service or product and that
invoice is not paid immediately e.g. through credit card payment or services such as PayPal, your client or customer is in debt so it’s an outstanding debt for you.
Yes, you could argue that your debtor owes you money until the amount invoiced is available on your bank account, but let’s keep it simple and say an outstanding debt is an unpaid invoice.
What is debt collection?
There is a bit of a misunderstanding because what a lot of people understand debt collection to be, is a reminder letter. A reminder letter is a, often relatively aggressively written, letter to your debtor (client) that threatens them with a certain action and sets a new payment day.
(Please google “reminder letter debt collector” and look through the images and you’ll get an idea.)
However, Hi, I’m Sally believes, that debt collection is somewhat a part of a customer relationship management approach. Therefore, we don’t send out threatening letters, we actually work for you.
Why do I need accounts receivable?
Small businesses often don’t differentiate between their accounts payable and accounts receivable and usually the process of the financial “in & out” is simply called accounting or “keeping the books”.
This can work if you only have 2 or 3 invoices per months to administer or if you have an online shop or if you have a very personal approach when it comes to reminding your debtor.
However, for everyone else, especially small business e.g. in the construction industry, you need to keep an eye on your accounts receivable for two reasons:
- Your accounts receivable approach is connected to your cashflow
Put simply, if you work and send out invoices and these invoices don’t get paid, there is
no money on your bank account. That means you can’t invest e.g. in material or pay yourself a salary. Often small business owners only notice the is a problem when their credit card or their credit at a supplier is maxed out.
- Without debt collection, you constantly need new clients
It’s simple, if you don’t chase your money, you constantly have to find “new money”.
We get it, small business owners are often caught up in trying to find new work and new money. They don’t think about the invoice from last week. But then “last week” turns into “last months” and into “last quarter”. And instead of chasing their money from 2 months ago, they try to find new work, new clients that hopefully pay on time.
That again leads to less time to chase their debtor and with every new job the risk increases that they again will not get paid.
Why should I outsource my debt collection?
Because you don’t have the time, the knowledge, the experience or the guts. Period.
Australia’s “mate culture” and “smart casual” business-relationship are great, there is no doubt about that. Making business is fun. However, this culture is also the reason why small businesses are owed on average over $13.200 each or over 2 billion in total.
You should outsource your debt collection because if you don’t chase your money, you will
Who is the best partner when it comes to outsourced debt collection service?
We could just say “Hi, I’m Sally” but it’s a bit more complicated. If you have old debt and never chased your debtor, we recommend a combination of what we do (personal debt collection service) and e.g. sending reminder letters via one of the bigger debt collection agencies.
Hi, I’m Sally would approach your debtor personally, remind them of their outstanding debt and negotiate a payment plan, and only if that doesn’t work, we would recommend you to refer your debt to an old-school-debt collector.
Why you should go with that approach?
With Hi, I’m Sally you are getting your money, but you are also keeping your clients! As soon as you ask a debt collector to send out a threatening letter, your client relationship (and mateship) is at risk.