How to negotiate and create a payment plan with your debtor.
Many business owners, contractor, freelancer or sole trader do not think of a Payment Plan as being a very handy tool to get outstanding debts recovered. Often Payment Plans are seen as something ”corporates” do and as something that does not work for small businesses.
However, in a world where you hear radio ads that offer “a personal loan from $100 to $5000” provided by startup companies rather than banks, why not use the Payment Plan in a similar fashion?
After all, every outstanding debt is a loan to the debtor!
There are some really simple rules to follow if you want to the set up a Payment Plan.
- Ask some basic questions and try to figure how the cash flow of debtor really looks.
Typical questions could be:
- The reason for not paying
- Why the reason for not paying occurred
- When the debtor could pay or if someone else could pay
- Ask how much the debtor could pay per week. Do this without offering an amount but with an amount in mind.
- After you got an understanding of the situation of your debtor, offer a Payment Plan.
Keep in mind:
- Document everything! Take notes while you speak.
- Offer more small payments (e.g. weekly, fortnightly) rather than bigger payments (monthly/quarterly)
- Set the first date for payments during your negotiation, then later communicate the following dates of payment
- Communicate what happens when the payments from the payment plan bounce.
- Maybe offer “discounts” for quicker payments.
- Always send an email afterwards (or even a letter) that includes all the details of the payment plan and let you debtor confirm them.
A Payment Plan is a great way to start the flow of money back to the creditor and won’t force the debtor into financial trouble.