The Best Way To Recover Debt
Do you have clients or customers that aren’t paying on time?
Asking for an overdue debt to be paid is an uncomfortable but sometimes necessary part of being a business owner. Usually, sending a friendly reminder or giving a courtesy call is enough to prompt the customer to pay you. But if the customer isn't responsive, you might have to escalate the situation.
Here are some steps you can take as a guide to receiving an overdue payment from a customer.
REACH OUT
When payment first becomes overdue, reach out to your client/customer via email or letter (it’s best to have a paper trail!) with a courtesy reminder. You might find they have simply forgotten about the bill or made an error when paying.
Be sure to include payment options, banking details, and contact information in your reminder to make it easier for the customer to pay you quickly.
FOLLOW UP VIA PHONE
If the client/customer has missed the next agreed-upon payment date or there has been no contact at all, try giving them a call to chase payment. Check in to ask if they have received the reminder with your payment details; this gives you the chance to talk to them directly which can help to receive payment.
SEND A LETTER OF DEMAND
If your previous attempts to contact them and receive payment have failed, send a letter of demand (a formal request, usually written by a lawyer or debt collecting agency, that demands payment of the debt). It can be very effective in delivering a positive outcome but keep in mind it should be done as a last resort as it has the potential to damage the business relationship.
CONSIDER SETTLING
If the client/customer disputes the debt or claims they cannot make full payment, you could consider a settlement. For example, you may agree to a lesser amount or a payment plan over a period of time.
TAKE IT TO COURT
If you cannot come to an agreement or the client/customer is refusing to make payment, there is the option to take them to court. This is the time to consult a lawyer: they can advise you on the next steps and best course of action.
At Iron Advisory, we help ambitious business owners become more profitable and create the lifestyle of their dreams! Not only are we qualified accountants and advisers, but fellow business owners. We’ve built our consulting practice and gym wear brand from inception to a 6 figure turnover, and we want to help you do the same. You can book a free and no-obligation consultation with us here.
**The contents do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.