One of the trickier jobs for a bookkeeper or business owner to master is effective debt collecting. If you’re not assertive or outgoing, then phoning up people and demanding payment can be quite a daunting task. Here are five quick ways to be more confident and effective at chasing debts.
1. Write a credit policy
If you haven’t got this far, this is definitely the place to start. Before you start to chase money, you need to draw up a clear set of rules that your customers are expected to follow. Your credit policy should include trading terms you offer your customers, how often you send statements and at what point the debt gets passed to a debt collecting agency. Your credit policy should then be included as part of your contract or credit application that all customers need to sign and agree on.
2. Don’t waste time
Dun & Bradstreet are specialists in debt collection with over 160 years in the business. They published some very interesting facts:
- 6.2% of debts that are 1 month overdue never pay
- 26.4% of debts that are 3 months overdue never pay
- 42.2% of debts that are 6 months overdue never pay
The statistics tell the story: the longer a debt is outstanding, the less likely it will be paid. So don’t wait or take the ‘soft’ option… chase those debts! It will give you more stress and cost you a lot more if you put it off.
3. Get on the phone
Phone calls are far more effective than sending reminder letters. Your initial phone call should be polite, aiming to build rapport with the business owner or account manager. Being polite doesn’t mean you can’t be straight to the point though. Ask if the payment will be sent immediately. If the answer is ‘no’, ask why not – and don’t interrupt their response. If they are genuinely having a tough month, don’t just let them ‘pay you when they can’ be a solution. For example, say something like, “How about you pay half this week and the remainder in 14 days?”.
4. Don’t buy into excuses
If they say that they have lost the invoice, email them a copy within the hour and phone them back to confirm they have received it. If there is some kind of delay in the system, ask them to look into it today and let them know that you will be calling them tomorrow to find out the details. These techniques will keep the person you are dealing with be accountable for what they say they will do.
5. Confirm the commitments in writing
Before hanging up, try to ensure you have gained a commitment from the debtor to pay a specific amount by an agreed timeframe. As soon as the phone call is over, email them thanking them for the commitment they made and confirming the agreement in writing. This documents the agreement and, if there are issues down the track, both parties have everything that was agreed to in writing. That way, you avoid the “he said, she said”.
6. Get Debtor Daddy to do the chasing for you
If you want to remove yourself from the debt collecting process and automate it, let Debtor Daddy do the work for you. Debtor Daddy is a tool that works with Xero to keep you on top of your debt recovery. There are two plans to choose from, both of which come with a 30-day free trial.