7 steps to collecting a small debt

Despite efforts to reduce it, late or non-paying customers are still something businesses up and down the country struggle with. It’s inevitable that at some point you will come across a client that cannot or will not pay for the goods or services you provide.

For small businesses this can be a big problem – read more about the cost of collecting late payments for businesses here. Sometimes a friendly reminder is simply not enough to encourage your client to pay an overdue invoice, and that can leave small business owners unsure of what to do next. So it’s best to know in advance what to do in these situations. As a starting point you can follow our seven steps to collecting small debts.

1. Don’t Panic

It can be frustrating and sometimes worrying when your cash flow is affected by unpaid debts month after month. Clients often sense if you are angry or upset, shouting at them will not necessarily encourage them to pay up any quicker. If anything, it can make some more determined not to pay you immediately. Keep your cool and be polite in each phone call or email. After all, you don’t want to ruin your relationship over something that could turn out to be a one-off mistake or oversight.

2. Know Where You Stand

It’s important to know your rights in these situations, as well as the options available to you and the next steps you can take. Read through your own terms and conditions to refresh your memory of the agreements made between you and the client. Ask advice from an expert if you need to. Once you have all the information about the problem and available next steps firm in your mind, you will be able to proceed with confidence.

3. Keep Records

This is a really important point. No matter what the next step is, you will need documentation to back up your claims. This includes invoices, proof of delivery and records of all communication between yourself and the customer. In some cases this may prove unnecessary but if you do have to take it further this will help you build a case going forward, and will come in handy if this behaviour is repeated in the future.

4. Maintain Professionalism

Remember, the aim is to collect the debt quickly and in a reasonable manner while, keeping the client on board, if possible. Calling them every single day is not going to help, so try every few days or once a week to avoid harassing them. Our team recommend taking a diplomatic but firm approach for best results. While you don’t want to harass them, you don’t want to come across as a push-over either.

5. Consider Settlement Options

If you have been chasing a debt for some time and are feeling ready to write it off, first try offering the client a settlement. At this point any money is better than no money so this could be a solution that suits you both. The settlement doesn’t have to be for the full amount of the debt, but should go some way to covering the time you’ve invested in chasing it, while providing a way for clients experiencing money troubles to pay off their debts.

6. Call In The Experts

Did you know that the vast majority of debtors will pay or make an offer of payment within 7 days of being contacted by a debt collection agency, even if they have refused to pay beforehand? If chasing your clients is taking up a lot of your time and causing you stress, consider hiring a debt collection agency like us. We offer a range of services from one-off debt collection to recovery of multiple late payments. If you bring in a debt collector, they can help retrieve the monies owed, or guide you through the court process if needed.

7. Asses Your Clients

If this is a problem that seems to be occurring on a regular basis, then it’s time to take a look at each of your clients and find out why. For an in-depth investigation we offer a business investigation and analysis service. Our reports provide you with a comprehensive understanding of your client’s credit history and a useful credit score to keep you ahead of the curve and prepared for possible problems. By doing this before a client comes on board, you can use the information to adjust their credit terms, invoice length and more, keeping you in control of the cashflow.

Interested in skipping straight to steps five and six? We understand that chasing small debts is extremely time consuming and stressful. At Debtcol we pride ourselves in having a thorough knowledge of contract law and debtor behaviour. We do our best to collect your debts without court action. Not only is this best for your business in most cases, but courts expect you to have made all reasonable efforts to recover your debt or resolve any dispute before starting legal action.

We work across many commercial sectors for clients, from sole traders to SMEs to national companies. Get in touch today to discuss your requirements and our team of experts will be able to suggest a package that suits your business.