As a startup business owner, there will be several instances when you will need to know how to recover money. Whether it is recouping money from a customer who has taken your goods or services in advance and is liable to pay or it is recovering money from an individual who has taken an amount from you and has promised to return in the future, there several ways that you can use to get your money back if things fall off track.
Here are some useful tips on how to recover money from someone.
- Start with a reminder
In case the debtor has missed a payment deadline, the first thing to do is send a reminder. You can send the reminder via email or a phone call. If the payment is not paid even after receiving the reminder, it can be followed up with an email. Sometimes, it is likely that the debtor has the intention to pay, but forgot about the due date. So, when you send a reminder, it can allow them to arrange the payment at the earliest and clear off their dues without you having to take any further actions. In case the debtor have some escalation matrix , escalate the same to the senior management on regular intervals.
- Negotiate the terms
Sometimes, the debtors have a clear intention of paying the debt, but due to strained financials they are not able to meet the terms of payment. Under such circumstances, they can ask for a meeting with you to discuss the terms of payment and negotiate. As a creditor, you can chalk out a plan with them to offer a flexible repayment method which may or may not include the interest on the payable amount depending upon the term of the payment and amount due.. You can extend the deadline for payment, take payment in instalments, or take goods or any other valuable assets to settle the payment – whichever method the debtor feels comfortable with.
- Go through your agreement
If despite reminders, the debtor has failed to make the payment, the next step is to go through your agreement. Referring to your agreement will allow you to know if the debtor has defaulted in the repayment schedule and what other steps can be taken if you don’t wish to go for litigation. The agreement will comprise of the repayment schedule, various methods of payment, and all the other terms.
- Send the debtor a monetary demand letter
In case where the debtor has failed to make the payment despite reminders, they will have to be served a monetary demand letter. The letter will comprise of the following information:
- The amount of debt owed
- The date of loan given
- The repayment date or schedule
- A deadline for repayment along with a warning stating that if the amount remains unpaid, the creditor shall take legal action
It is important to send this letter since it can serve as an evidence in debt recovery cases. It can be used to prove that the debtor is not willing to make the payment.
- Get a debt collector firm on board
Hiring these firms can be an efficient way to recover your money. Hiring a legal professional has been proven to be useful in recovering debt since the debtor is more likely to pay when they receive a letter from the creditor’s lawyer or solicitor. Debt recovery is very important for any company’s financial health as it has adverse effect on the credit rating of the company. Company having huge bad debts or debts recovery percentage likely to suffer from liquidity issue in long term of the business.