chasing slow payers

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chasing slow payers

chase accounts as soon as they become overdueI was recently asked to supply the outline for an article about collecting overdue accounts. It will appear shortly in a national magazine.

Thought I’d include it in this blog as it reiterates several key points that can all be seen in the one place. I’ll put links in to past posts. Hope you find it useful.

Collecting overdue accounts (or “chasing slow payers“) can be a major issue for small to medium businesses but the impacts of not staying on top of debtors can be devastating.

Michael Todd, Senior Consultant to the profitability and cashflow systems firm of OPS Global, sees the impact of overdue accounts every day and offers the following advice to SMEs.

Do You Really Have To Extend Credit?
Payment is expected at the time when an airline flight or a hotel is booked. Businesses can secure their own positions if they can and do likewise. No need to be exposed to the risk of bad debts unless they absolutely have to be. Conduct credit checks for accounts over a certain amount if credit must be offered.

This is the first of three fundamental principles behind all successful account management systems – Start Everything Early. Businesses should set out a clear credit policy, document exactly what their payment trading terms are and describe how they will follow up any errant accounts. This should be circulated to all staff.

Issue Invoices Promptly
Customers cannot be expected to pay promptly if invoices are not issued promptly.

Make It Easy For Customers To Pay.
Bank details and a specific “pay by” date should be on all invoices. Credit cards should be accepted; they too make it easier for customers to pay.

Chase Unpaid Accounts Weekly
Overdue accounts should be followed up as soon as they are overdue and then reviewed weekly. The prospects of collecting an account diminish greatly as each day passes.

Being polite but persistent when chasing slow payers is a very simple but effective strategy. This is the second principle. Another excellent way to gradually escalate pressure on debtors to pay without the risk of offence is to establish a Collection Hierarchy.

Three levels is the ideal
– An Information Gatherer, someone to inquire if the payment has “already been sent”
– A Problem Solver, a more senior person who can contact the debtor with a “How can I help” approach, and, lastly,
– A Decision Maker – the most senior person who, armed with all of the facts can decide on the next logical collection action to be taken.

Always Blame Someone/Thing Else For Following Up Late Payments
The debtor can “save face” if he has a common enemy with the creditor. Bank Managers, Head Offices, Computers, Board Meetings, and Policy are excellent candidates.

Assume Innocence
The customer can’t be offended with the initial phone approach if this wording is used – I was doing the accounts today. We don’t appear to have received payment for May yet. Has it been sent or is it on the way?

Speak The Good News, Write The Bad News.
If you have something pleasant to advise the customer, phone them. If it’s something unpleasant, write it. Writing is less personal, more formal, more credible.

This is the third principle. Don’t just send out monthly statements and expect to be paid. As a reconciliation item they’re invaluable but as a collection tool, they’re virtually useless. If statements must be used, a two-column table – “Current” and “Overdue” – is more preferable to a four-column table – “Current” to “90+Days” – that advertises that you offer generous 90+Day trading terms!

Action Overdue Accounts Weekly
Although already mentioned, THIS is the key. Follow up weekly. AND, gradually increase the pressure on the debtor to pay. A gentle reminder email followed by a firmer one and then phone calls, firmer emails and sms messages.

Send A Text Reminder From A Computer.
Letters, phone calls and emails can be ignored. Text messages seldom are. There are many computer-to-mobile providers around. SMSit has a user-friendly service where messages only cost 10c each.

Don’t Keep Phoning
If the caller knows the likely outcome of a phone call and you do too, then consider putting something in writing and sending that instead. Better also if it’s from an ‘unknown source’.

The more times you phone, the less impact on the debtor.

Michael Todd posts regularly to the Blog – 

By | 2020-04-09T05:50:08+00:00 February 6th, 2009|miscellaneous|0 Comments

About the Author:

Have you ever wondered why a client does business with you and then ignores your invoice like they had no intention of paying it in the first place or they treat you like their own personal line of credit, leaving YOU dangling, waiting months for their payment? Unfortunately this situation is all too common and can even be puzzling for the most experienced business owner. If you’ve ever had to handle outstanding accounts or you are just so over non-payers, then we can help. Real-world skills, solutions, tips & strategies to get more accounts paid on time, and, most importantly, how to maintain customer goodwill while keeping YOUR cash flow in the positive. You will find the blog posts helpful but to get real results, contact us by using any of the forms on this site, by email or by phone. I’ve been involved in the management of accounts for over 30 years, heard every excuse in the book, can spot a non-payer at 20 paces. Finance Companies in the 70s (systematic, tough), professional firms in the 80s (no systems, too gentle) and, since then, just about every other sort of business you can think of. I’ve written books on the topic, spoken all over the place about it and the blog in this website is my way of “giving back”. I hope you find it helpful.

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