Chasing payment

It is important to invoice regularly and have an agreement in place in respect of payment terms, interest charges or late fees.

If it is regular work, it is important to invoice weekly because it sends a clear message to your debtors that your business is on the ball. Essentially what you are doing is educating your clients and customers that late payment will not be overlooked or ignored. If you have to phone the client, make the sure the action goes to someone in your organisation who is professional. They should be friendly but firm. That means it should not be the head salesman or a pit-bull type.

It is important to have a set routine and document everything. Make sure there is follow up and, if necessary, be flexible with clients.

If they still do not pay, a strong letter on a solicitor's letterhead, often gets results. As does a call from debt collectors.

Basically, there are five steps for chasing debts

1.     Send a statement asking for payment. Create a Reminder or Final Notice template letter.

2.     Telephone the customer and remind them of the debt. Ask them if there is a problem. If there appears to be no barrier for payment, ask them to settle the debt by a specific date.

3.     If there is a cash flow problem, try to arrange a payment plan that accommodates both parties and be reasonable.

4.     If the problem is recurrent, then it is a good idea to review the customer’s credit terms. Keep an eye out for patterns.

5.     If the debt is not settled in the given time frame, you might need to take legal action.

When you make the phone call, it is important to remain calm and confident. Do not get personal and make threats. It could work against you if it went to court. No matter how bad or angry you might feel, it is important to be professional and courteous.

If the reminder notices and phone calls are not producing the desired result, it is time to send a letter of demand.

The letter of demand is important for two reasons.

First, it lets the debtor know you are prepared to start legal proceedings if the debt is not paid. Secondly, it sets up a paper trail with written evidence of your claim and your attempts to settle the matter. A court will need that.

Make sure you keep a copy of the letter of demand for your records. Send the letter of demand to the debtor through either registered post or fax. What is important here is that the letter needs to be sent in a way that is trackable. It is important that you can confirm that the debtor has in fact received the letter. 

Send only one letter of demand to the debtor. If you are not serious about the threat to initiate legal action do not send one at all. Otherwise, the debtor will know you are bluffing and you will never see your money.



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