Try this strategy when you’re chasing slow debtors who keep making promises to pay, but don’t. It’s a recent case study from one of our clients – an accounting firm.
* several very old invoices still overdue in the accounts receivables ledger.
* partner previously very reluctant to “push” for payment as client was aggressive when contacted about his overdue accounts.
* other partners finally insisted on a payment arrangement so that account is up to date within “a couple of months”.
We wrote the bad news. This is the letter sent. Note the format:-
——- paragraph 1 – we stated the facts.
——- paragraph 2 – we said what we want the debtor to do.
——- paragraph 3 – we make him a reasonable offer
——- paragraph 4 – we told him what will happen if he doesn’t do as requested. (We also applied “fear of the unknown” in this paragraph.)
Dear Mr Debtor,
According to our records,
1. The following balances remain outstanding
Debtor Family Trust ————– $8,225.50
Debtor Superannuation Fund —- $300.00
2. On 26 November, it was agreed that you would reduce both accounts by way of $1,000 per fortnight.
3. Since that arrangement, three payments have been received.
They are itemised on the next page.
As that arrangement has not been maintained, and as some of the invoices in the balance outstanding were raised some eight months ago, the firm now requires that your account is fully up to date within a reasonable period, say, by Friday, 29 May.
In order to provide you with some assistance to achieve this, the firm is prepared to make a final offer to accept settlement by instalments and further extend their credit facility for the overdue balance by accepting payment in the schedule set out overleaf.
Please, however, be quite clear that if this final offer of a payment arrangement is not honoured, the firm will be left with no other alternatives but to revert to policy and pursue recovery through alternate channels.
Initial Outcome (straight out of our file notes)
14/04/09 – 10.22 – spoke to DEBTOR – paid $1,000 off 35678 ***** 27/03/09 – 10.15 – returned call – wants two invoices re-invoiced – they will be paid in 2 weeks – gave m/card details to pay out SUPER account – a very ‘flatline’ conversation ***** 27/03/09 – 8.05 – FRED DEBTOR wishes to speak to you – can you call him on 0412 345 678. He has obviously received your letter!****** 25/03/09 – sent LAST OFFER payment arrangement letter
This client’s attitude has now changed. He is even being amicable. He recognises that, this time, the firm means business. I also believe that by showing strength, he will show more respect to the firm.