Business Debt Collection: The Right Way to Do It

Business Debt Collection: The Right Way to Do It

Ensuring that your customers pay on time is vital to the success of your business. Late payments can cause your cash flow to suffer, and if you don’t keep on top of your business debt collection, you may be unable to pay your own suppliers.

Keep an eye debts owing to you before they become a huge problem. If customers are struggling with cash flow, they tend to focus on paying those businesses that chase them up first.

Send Statements

Some customers actually ignore individual invoices, and don’t make a payment until the statement arrives. So do send out a statement each month, giving details of each invoice owing.

Offer a Discount/Penalty

Offer a discount for payment by the due date, or a penalty if the invoice is not paid by that date. Knowing they are going to pay less often encourages customers to pay on time. State the discount/penalty clearly on the invoice and call the customer a few days before to remind them of the due date and that they will receive a lower rate if they pay on time.

If They Don’t Pay On Time

Sometimes people forget, or they have genuine reasons for not paying on time. So send a nice email or letter reminding the customer that the payment is overdue. Give the invoice number, what it was for, and the date. If possible also include a copy of the invoice. When you send it is up to you. You may choose to write to them on the due date, or a week or two after it has passed. But remember that the longer you let it drag on, the worse the impact is on your cash flow.

If They Ignore Your Letter

Call them and ask if they received the letter/invoice. If they say they didn’t, be prepared to fax or email it to them immediately. One thing that makes business debt collection difficult is when customers repeatedly claim not to have received the invoice. Once you know they have it, you can offer to take a payment by debit/credit card over the phone. By this point you will know if they are unable to pay.

If They Still Don’t Pay

If a customer still fails to pay after several reminders, and you are unable to negotiate a payment schedule or date with them, you will then need to resort to a letter threatening legal action such as a County Court Judgement, or Bankruptcy Order. When and if you do this depends on your cash flow, your relationship with the customer, the amount owing and their reason for not paying. It is worth seeking expert advice at this stage to find out which form of business debt collection is the best option is for you.