Dealing with Debtors and How to Avoid Outstanding Debt in the First Place

Stop letting people use your money and your business as their bank. It's costing you a fortune.

In fact, if you have $10 000 in outstanding debt, that's money that is owed to you, it's similar to carrying a loan for $100 000. What could you be doing with that money if you had it in your bank? Probably making money, so the opportunity cost is huge as well.

The simple trick for managing debtors is that you must put processes in place to make sure you don't get bad or overdue debt to start with. Create Terms of Trade that people that you deal with must abide by. If they don't want to play using your rules, then don't do business with them. One bad deal will cost you the profit from many of your good ones.

Once you have your Terms of Trade in place, then you also need a system for collecting money. This doesn't have to be a massive undertaking, just a simple system. I have helped many businesses put in place simple debt collection procedures which, along with new Terms of Trade, have transformed the cashflow of the business and ultimately the business profitability.

Like any of these ideas, it's one thing to know what to do and another to put them in place. This is one of those items that is truly 'working on the business' stuff. Make the time and get it done.