My debtors are slow, or won't pay me, how do I improve debtor collection?

By reading this page you will hopefully improve your own debtor collection. See the late payment excuses below for good replies to the "cheque's in the post" excuses!

Cannot drive the debtor collection as you don't have people or time? Why not try IDS Cashflow Manager?

An outsourced debtor management, credit control process. Modest fees and access to state of the art systems from a few hundred pounds per month. Call Keith Steven or Philippa Allan now on 0800 9700539 for a brochure.

Dealing with late payment

1. Introduce a strict policy for debtor collection built around specific target dates.
   
   
2. Assertively collect debts – it is your working capital
   
   
3. Take references up – most do not. We are amazed at how many businesses fail to ask for references, how many fail to read and act upon any they get and how lax credit limit enforcement is when faced with "iffy" references.
   
   
4. Buy a subscription to a credit reference agency early warning system. This is particularly important if you regularly open new accounts and or large accounts. It is so cheap to do and can save you, literally, thousands of pounds. Try Creditsafeuk
   
   
5. Refuse to supply even if a "good " customer is over limits, call them and ask what the problem is. Do they have the invoice, delivery note and are they satisfied? If yes ask for your money. If they still don’t pay consider issuing:
   
   5.1. Final warning letter - you will commence action if you do not hear within 7 days - this helps establish that the debtor accepts the debt.
   
   5.2. Obtain a County Court Summons form from your local court; issue a copy of it with all details correctly filled in. (We are amazed at how many people go to the bother of issuing half filled out forms!)
   
   5.3. Tell the debtor you will issue the summons in 5 working days unless they pay. If this fails:
   
   5.4. Issue the summons to the court. After judgment is granted call the debtor for the money. If this fails:
   
   5.5. Proceed with a warrant of execution - basically an instruction to the court to collect the money (they send a bailiff to do this). If this fails:
   
   5.6. Consider a winding up petition if the debtor is a company or a bankruptcy petition if the debtor is a sole trader or individual.
   
   5.7. Up to the last step above this is a relatively inexpensive way of debt collecting
   
   
6. Build a collection system, use "Sage" or other accounts package or use a manual system with trigger dates for every invoice.
   
   
7. Charge interest – its your money
   
   
8. Remember a good customer who does not pay is not a good customer long term!

Cannot drive the debtor collection as you don't have people or time? Why not try IDS Cashflow Manager?

An outsourced debtor management, credit control process. Modest fees and access to state of the art systems from a few pounds per week. Call Keith Steven or Philippa Allan now on 0800 9700539 for a brochure.

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The cheques in the post! Inevitably the excuses come out - see both sides of the argument below. Also see legal action page for the opposite viewpoint!

Answers to late payment arguments

Q: "We have not got your invoice please send a copy".

A: Take their name and position in the debtor company. Fax, post and email a copy, then call for the person you spoke to and ask when payment will be made.

Q: "Sorry our computer is down"

A: Ask how often this happens, how long will it last; please send a manual cheque on account even if not for the full amount.

Q: "The cheque is in the (ubiquitous) post"

A: Where, when and by whom was it posted and what class of stamp was used? Set a reminder in your diary to call again the next day or two days if sent second class. Again find out why the cheque has NOT been posted.

Q: "We can only pay you when a large debtor pays us"

A: Get the name and contact details and call the debtor yourself, check out the story, is it true? If yes ask the debtor when they envisage paying some or all of the money. Then set a reminder in your diary to call the customer when payment should have been received.

Q: "We cannot pay we are at the bank limit", or "the bank is not helping us we have a cashflow problem".

A: Ask if they know about s123 and s214 Insolvency Act 1986 (insolvency test and wrongful trading) write pointing this out. Tell them to look at our website www.companyrescue.co.uk. Refuse to supply until an agreement for payment is reached.

Q: "The person who writes cheques is away"

A: Ask the person how other essential payments are made such as utilities and wages. Get a commitment to pay you too - even some on account.

There are many more excuses but all add up to the same thing - if the customer cannot pay to your terms they may be insolvent. So beware. If they are a key customer go and see them; talk together about a plan to recover the position. You may accept staged payments over time provided that new supplies are paid to terms.

If they are insolvent and readily admit they have problems with the bank and the crown then steer clear until the position is resolved.

Be terrier like, never let go until the debt is paid (even in stages) or they have gone into an insolvency mechanism. Then get full details of the liquidation, receivership, administration or company voluntary arrangement. It may still be possible to get your money (particularly in CVA or Administration). If you want advice on such insolvency situations email us.