"My debtors are slow, or won't pay me, how do I improve debtor collection"?
This is a common question from our callers. Follow some of our tips below to help improve collecting payments.
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 on new customers – 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.
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.Go to the customer's premises and demand to meet the owner, MD or finance director. Say you will not leave until the company gives you a cheque, even if its post dated.
Remember a good customer who does not pay is not a good customer long term!