Debt collection can be a frustrating job when you have already rendered services and your invoices that remain unpaid have become more than an irritant.
Businesses of all sizes barely have enough time each day to run their operations effectively and deliver the results that keep their customers coming back. So the added drain on time that comes from chasing up unpaid bills is something that many simply can’t afford.
Enlisting the help of professional debt collection services allows business owners to focus on their core competencies – running their businesses – as well as freeing up their time for family and leisure activities.
However, at the outset, it is important to be aware of the main reasons your invoices might go unsettled.
The Australian Financial Security Authority (AFSA) is a federal government organisation that is tasked with improving the outcomes for businesses and consumers that are affected by bankruptcies.
As a result, it has access to high quality data from across Australia about why businesses ultimately fail. Many of these reasons apply at an earlier stage as well, when businesses and individuals begin to delay paying their bills. The AFSA completes a regular survey of why businesses fail to pay their bills, and it recently published the results of their 2015 study.
So what are the top reasons for non-payment of bills?
Top Reasons for Late Payments, Non-Payments and Bankruptcy
Loss of income: Perhaps unsurprisingly, general loss of income is the biggest reason that bills go unpaid. Put simply, if there is no money coming in, there can be no money going out.
Depending on the type of business you operate, the warning signs can be seen early, and you can plan for this circumstance.
For example, if you operated in the mining services space in recent years, as many fitters and turners, diesel mechanics and tradespeople did, it would have been clear to you that projects were becoming fewer and budgets were becoming stretched.
Similarly, any significant rise in unemployment can be a warning sign for a business that deals with consumer goods. Loss of income can be a slow process, and businesses who adjust their payment terms when the risk is higher are likely to do better than those who don’t.
Excessive use of credit: Credit cards, and other short term credit like payday lending, all come with incredibly high interest rates. If a customer is overly reliant on these short term sources of finance, their cash position can turn from healthy to insolvent very quickly as payments become due and the interest payable balloons.
For businesses facing cash flow difficulties, relying excessively on short term finance can be a little like having a leaking boat and punching extra holes in it.
Domestic discord and relationship breakdowns: Whether you are dealing with a business or an individual, it’s important to remember that financial pressures can arise as a result of relationship problems.
If a sudden change in circumstances has affected someone who has an unpaid invoice, it is likely that they may need more time to organise their finances, and those collecting debt should be mindful of this fact.
Ill health and/or absence of health insurance: We all accept that having insurance is part of modern life and essential, but when it comes to income protection insurance, Australian’s are woefully underinsured.
If you have a debtor who has been forced to take time off work through illness or injury, there is a high probability that their medical bills coupled with the loss of income will result in a long delay to bill payment. Once again, it is important to remember that in some circumstances, some flexibility is required.
Those four reasons alone represent roughly 80% of the total stated reasons for why bankruptcy occurs, and it is logical to assume that a similar percentage is true for unpaid invoices and bills.
To simplify your debt collection requirements, we encourage you to contact us here at Challenge Collections. We can track down your unpaid bills, find out why they remain outstanding and increase your chances of recovering the funds.