Collecting Your Cash

Ensuring that you can collect what you are owed is as much about the groundwork you put in beforehand as it is how you go about the actual processes of collection.

Get Organised

Make sure that you have a fast, accurate and systematic collection system that includes a variety of communications methods, such as invoices and statements, letters, emails, telephone and personal visits. Ensure you have mapped out an escalation process for your business that identifies when you will use each of these methods.

But before that point, get yourself in a good position so you mitigate the risks of doing business with any customer:

• Check a new customer’s creditworthiness before drawing up a contract.
• Refuse orders if a customer has an unacceptable payment record or obtain payment in advance.
• Set strict credit limits and keep to them.
• Prepare unambiguous written contracts and/or terms and conditions of trading.
• Involve the sales force in negotiating the payment terms and ensuring that these are understood and agreed from the outset.
• Make sure you know and comply with procedures used by your customers’ buying and accounts departments.
• Initiate and maintain close contact with your customers, particularly with the person responsible for paying your account.  Try to create a rapport so that, even when money is tight, you are top of the list to be paid.
• Make regular credit checks on your existing customers.
• Ensure that all despatch notes and invoices are accurate, and are delivered to the right customer, at the right address, at the right time.

Dealing with Disputes

At some point a customer will query an invoice. Make sure you have mapped out a system for handling this in advance of it happening. Because the quicker you can resolve it, the quicker you can obtain your cash. Your system should cover acknowledging the query swiftly, investigating it thoroughly and replying with as much evidence to support your reply as possible. If the query does not relate to the whole balance, make sure that the customer knows that the undisputed element of the debt is still payable within agreed terms. Make sure everything is done in writing so you have a documented trail.

When they simply won’t pay

If someone simply won’t pay and there is no reason for withholding payment, don’t hesitate to act. You could appoint a third party to pursue the debt for you. Or you could consider entering into legal proceedings. Always seek legal advice and look at the costs involved. There is frequently more than one avenue available to you and each has a cost attached. Explore the options and look at the cost and benefits of each.

But there are also remedies outside of the legal system. You may wish to impose collection sanctions such as stopping supply. You can also review their credit limit, impose interest and compensation for late payment, create a payment plan if you believe there is a genuine desire to pay, or seek to invoke a Retention of Title clause to get the goods back in your hands.

Keep Calm and Collect

It is a natural human response to get frustrated if someone refuses to pay you what you are owed. But it is vital to keep calm and negotiate rather than escalate your discussion into an argument.

The key is to ensure that your contact is proportionate, honest, calm and conducted with respect. Look to negotiate to achieve an agreement that ensures that they pay the invoice but perhaps offers some consideration for the circumstances they may have found themselves in that has prevented them for paying yet.

Liquidation

All is not lost if a company goes into receivership. Put the effort in to collect as much as you can. The receiver will usually contact creditors within 12 weeks of the date of the court order and advise whether a creditors meeting will be held. If you are not contacted, make sure you contact them and lodge your claim by requesting a Proof of Debt Form. You will be sent a report giving estimates of the insolvent’s assets and liabilities and what the causes of the failure are considered to be. If you think that a company is withholding information about the assets, you should write to the receiver with evidence.