How to chase money from customers
There are many methods - also known as collection tools - you can use to recover money owing to you.
The most widely used method is the telephone, as it is direct and economical and feedback is immediate. Our checklists 'Preparing to make a call to chase money' and 'Handling debtor's excuses and objections' tell you all you need to know.
Other collection tools commonly used by businesses to recover outstanding payments are described below, along with some tips on using them effectively.
- These are brief messages on small pieces of brightly coloured adhesive paper.
- The stickers are attached to an invoice or statement to attract attention.
- They are inexpensive, quick and easy to use.
- Best used in association with other collection methods.
- Stickers are favoured mainly when the relatively higher cost of other methods is difficult to justify.
- Two letters are usually sufficient – a polite first reminder and a final demand.
- Information in the final demand should be clear on how much must be paid, and by when, and detail the action that will be taken if payment does not take place in that timeframe.
- Vary the content and timing of letters to prevent slow payers taking advantage of a set pattern.
- Address letters to a specific person or job title and make sure each letter is individually signed.
- Don't make threats you are not prepared to carry out.
Personal contact with business customers
- Gives you an opportunity to talk on a one-on-one basis, observe general trading conditions and look for signs that a business may be ailing.
- Collate all relevant information about the debtor prior to the visit.
- Ensure the person conducting the visit has sufficient authority to deal with any situations that arise.
- Confirm the outcome of discussions in writing.
- Consider legal action as a last resort.
- May be directed through a debt-collection agency or a legal firm.
- Before you commence any legal action, evaluate the following:
- whether the debtor is still trading or able to be located
- whether you've tried all other available methods for collection
- the quality of your documentation
- size of debt
- reputation of debtor and whether personal guarantees are held
- financial strength of debtor and whether security is held
- existence of any unsatisfied court judgements
- legal costs involved, particularly if the proposed action were to fail