Debt recovery is a process every business should have in place. By following a standard set of steps with your business customers, you should be able to reduce your debtor figures significantly, catching any serious cases before they become too difficult to pursue:
Step 1 – Send Invoice
Send the invoice (or statement) with clear payment terms stated on your document.
Step 2 – Phone Call
If your payment terms are not ‘payment on receipt’, politely call the debtor 5 days before the invoice is due to check that the invoice will be paid on time. If your payment terms are on receipt of invoice, call the debtor 3 days after the invoice date if payment hasn’t been received. If the debtor states a payment date when you call, wait to see if the payment arrives when promised. If the debtor says the account will not be paid, find out why, deal with the reasons (either send a copy of the invoice or resolve the query) and call again after 3 days.
Step 3 – Send Email
If payment has not been received within 5 days of the promised date (or your call), send your first communication by email. This message should state the invoice details, your payment terms and the date by which you request payment to be made. Attach a copy of the statement or invoice. This email must be sent to a named contact in the accounts department.
Step 4 – Follow Up Phone Call
If you haven’t received an email response, follow up the communication with a phone call 3 days after the message has been sent. Make sure you speak to the recipient, confirm that the email was received and request a promise of payment. Ensure you are told exactly when the payment will be made, by what method and for how much.
Step 5 – Final Notice by post and email
If payment has still not been received by the promised date, send a Final Notice to the named contact in the accounts department and also to the person who made the order, and the Financial Director and/or Managing Director/Business Owner. This should be sent by post and by email. The Final Notice should provide a clear and specific deadline by which payment must be received to prevent further action. In this letter you can refer to your payment terms and also your intention to charge interest, pass the debt to an agency, or take legal action.
Step 6 – Phone Call to Senior
Follow the Final Notice up by phone, 3 days after sending. Ask to speak to your named contact. If they use avoidance tactics, ask to be put through to the FD or MD directly. Your aim is to not leave the call without getting confirmation of payment by a named, senior member of staff.
Step 7 – Debt Collection Agency
If the account remains unpaid after the most recent promised date, don’t hesitate in asking a debt collection agency to take over the account for you. By employing the services of a professional debt recovery agency, you can be confident that no underhand tactics will be adopted, your business reputation will remain intact, and your debtor will be under no illusion as to the payment terms you expect from them.
Find out more about how debt collection agencies work or contact the team at P&J.
