How to get debtors to pay faster
Over 50% of businesses that incur a payment default go into administration within 18 months.
Payment defaults not only help you get debtors to pay you faster, they warn you and other companies of slow-paying debtors that might be in more financial trouble than you realise.
What is a payment default and how does it work?
A payment default is a notification on a credit report, flagging a debt that has not been paid. Once a default is lodged, it can affect a company’s credit score for up to 5 years. If a default is paid, its status can be updated.
While lodging a default can help you get an overdue debt paid, it also assists other businesses to avoid their own bad debt. Once a default has been registered, anyone else dealing with the debtor will receive an email alert that the default has been lodged.
Further, anyone that runs a credit report on that company will see the default present on the credit file. And this carries a lot of weight for our customers.
In fact, 91% of CreditorWatch customers said that they would not engage with a company that had a default lodged by another customer.
Warning debtors can sometimes be enough
Payment defaults should be used as a last resort. Encouraging a customer to pay up by issuing a final notice letter which threatens a default is often enough to prompt payment. Learn how CreditorWatch customer Ward Packaging used a letter of demand to collect their outstanding debts in this case study.
It’s never too late to lodge a payment default
You can still lodge defaults against debt that has been written off. In 2018, a construction company who uses CreditorWatch uploaded defaults against their bad debt write-offs from the previous three years.
They were contacted by one of the debtors who settled a debt in order to clear their credit file. The amount exceeded $50,000!