Being consistent when chasing debtors will help you to recover debts while maintaining good customer relationships.
Contact customers quickly about overdue invoices. If you offer payment terms of 30 days, begin following up debtors when payments are 7 days overdue.
Legal action is very expensive and should be considered a last resort.
Pursuing overdue payments
We recommend the following steps when chasing an overdue payment:
- Send a statement requesting payment and indicating this is a reminder or final notice.
- Phone the customer and remind them to pay the debt. Ask them if there is a problem. If they offer no reason, ask them to settle the debt by a specific date.
- If there is a cash flow problem, try to arrange a payment plan that suits both you and the customer.
- If this problem with overdue payments is ongoing, review the customer's credit terms.
- If the debt is not settled within the agreed time, you may want to consider mediation, debtor finance or debt collection services.
Debt collection laws
By law, there are things you can and can't do to encourage debtors pay.
If a debtor will not pay, you can contact them to request payment by letter, phone or in person. You must do this during normal business hours and not threaten, harass or physically intimidate the debtor.
Consider negotiating a payment plan and don't do more work for or supply more products to the debtor until they pay the outstanding invoice.
You cannot take or sell any of the debtor's property, unless you have a court order.
Learn more about debt collection guidelines for collectors and creditors.
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