Bad Debts

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Westminster Insurance
Ravensford Health
Balens


How to get tough on bad debt

Bad debts are the bane of many small businesses. For your therapy business to survive (and thrive) you need to get paid, not just send an invoice and add the details to your balance sheet.

You may not have considered invoicing yet. After all, many practitioners get paid at the end of a session. However, many clients, particularly businesses, will expect an invoice to be sent.

Invoices help you and your clients to keep track of work carried out, and resolve any discrepancies. Invoicing looks more professional, and will provide an accurate record if there are any accounting or tax issues. Good practice management software can make invoicing and accounting simple.

Getting paid on time

The following should ensure that you are paid within a reasonable about of time.

Always agree terms of business with your client in advance
When a prospective client makes an initial enquiry, send them your terms and conditions.

The standard period for settling an invoice is 30 days. However, you’ll find that some clients such as insurance companies demand longer terms.

Send invoices promptly
Send an invoice as soon as the work has been carried out. It’s tempting to put paperwork off, but in this case, the sooner you send the invoice, the sooner you’ll receive payment. This is where practice management software can automate and speed up the process.

Follow up outstanding invoices
Send a ‘Statement of Account’ as soon as an invoice becomes overdue. This is a friendly reminder to your client. Again, practice management software can automate this.

Overdue invoices: your next steps

Once an invoice becomes significantly overdue (for example, two or three weeks), your next steps should be as follows:

Call your client
Often, calling your client will galvanise them into settling their overdue bill.

Send a follow up letter
If the phone call didn’t work, send a letter asking for immediate payment. State that failure to pay will result in further action. Encourage them to contact you if there are any difficulties making the payment. You might then be able to agree part payment, followed by staged payments to settle the debt.

Refer the matter to the Small Claims Court
If the invoice remains unpaid despite all your attempts, you can refer the matter to the Small Claims Court. You won’t need a solicitor, and the hearing is relatively informal. For further advice, visit the Directgov website.

Refer the claim to a debt collection agency
If a court judgement has been made, and your debtor has still not paid their invoice, you can refer the claim to a debt collection agency. This means you can stop worrying about debt recovery, let somebody else handle it and get back to your business.

Remember that the last two points. are very rare, and in most cases a debt won’t come to that.

What to do next

Have a look at our Terms and Conditions section to find out more about the paperwork that you should provide to every client.