Collecting DEBTS 

Collecting outstanding debts can be difficult and often messy. With so many people out of work this has now become a topical issue.

          The collection process goes through distinct stages.  Put your requests in formal letters and keep hard copies.

          You must have procedures in place and documented so the staff handling finances can follow them systematically.

          Keep your demands brief, to the point, factual and easy to read.

          The first two letters you send should politely assume the customer has overlooked payment and will pay when reminded.    

          The third letter can ask for an explanation of the circumstances that prevent payment. If there is no satisfactory explanation it is time to take stronger action.

          Keep a hard copy of your demands even if you are seeking payment online.

A handful of tips to help you collect bad debts

* The reminder letter

          Assume the customer has overlooked the bill.

“This is a friendly reminder that your account is overdue.”

*  Strong reminder

          Assume the customer has overlooked paying.

          Be polite and reassure them that credit is still available. “You may have already paid. If so, we thank you. We look forward to an early response. ” 

* Enquiry stage

          Assume there is a good reason why the customer has not paid.

          Try appealing to their pride so they avoid the embarrassment of a bad credit record. “Please contact us immediately if you find you are unable to pay. Together we should be able to work something out.”

          Today unemployment may mean you may have to take a loss at times, or you may need to spread payment over a longer period.

* Urgent stage

          Be demanding and impress on the customer the seriousness of the situation.

          Point out what the customer has to lose if the bill is not paid. Imply the possibility of legal action or the problem being referred to a debt-collecting agency.

* Legal action

          If the customer can afford to pay and has refused to co-operate, put the claim into the hands of the small claims court or a lawyer for a hearing.

          From your records you will need to supply copies of all your communications to support your claim. 

–Geoffrey Moss (mossassociates.co.nz)

“It’s easy to get into debt but hard to get out.”

Source; “Revitalise YOUR Business” Moss Associates Ltd., New Zealand, Singapore Institute of Management, McGraw-Hill, Australia, Ane Books India and Se-Education Public Co. Thailand.