Collecting debts in 12 easy steps

  • When onboarding a new customer and offering credit terms, make sure you have details of the person to contact about payment.
  • Always send a statement electronically at each month end (if monthly terms). This should be easy with modern software.
  • Delegate someone other than the salesperson to contact the customer for payment. The salesperson has a different relationship with the customer, and this should not be compromised.
  • Ensure your sales ledger is updated daily with cash received. It is not a good look to be chasing debts that the customer has already paid.
  • Send an electronic reminder for unpaid debts immediately they become due under your agreed credit terms. Again, this task can be automated.
  • If still unpaid follow up with a stronger email in maybe a week. Record the dates of all communications on their file.
  • The next follow up (maybe another week) should be by telephone. This call is to establish if there are queries on price or quantity which is preventing an invoice being paid. If you agree to give a credit note, then do it promptly. If the query cannot be settled quickly, ask the customer to pay any other outstanding invoices. If there are no disputes, then note what they said about payment. This could be a promise to pay in “the next payment run” or “when the boss returns” or “next week”.
  • If still outstanding after another week has passed, call the customer, and refer to any promises made last week. It may become apparent at this stage that the customer is tight for cash.
  • Advise your salesperson to temporarily hold new orders until the account is brought up to date, advising the customer of the reason. They can blame the credit controller without upsetting the customer. This is a standard and effective way to get paid.
  • If there appears to be a reluctance to pay, this will usually be due to cash flow issues, it is important to realise that there may be other suppliers also trying to get paid and they who shout loudest get the money soonest. Bombard the customer with payment requests. Phone calls are by far the most effective at this point because when the recipient is embarrassed by their broken promises, it will give them a personal incentive to pay you.
  • This is a process to be followed routinely and it continues while you give credit terms. Don’t let the timings slip just because you are busy with other things as part of the process is to train the customer to pay on time without being pushed.
  • Review the credit terms of customers who make you work hard to get payment. Be aware of the cost in time and the effect on your own cash flow. Consider insisting on the customer signing a DD mandate or paying in advance.

We hope that this weeks blog has made collecting debts a little clearer. If you have any questions, please contact us via our website or social media!