The 4 PROFESSIONAL STEPS for debt collecting
1. Gentle Reminder
2. Firm Request
3. Top of the List Priority
4. Friendly “Threat”
Here are the basic steps to collecting what’s owed to your company:
Determine WHEN to start action against the debtor
You don’t want to bring down the hammer on a good customer just because he’s a little late with a payment. As soon as you start going after your money, your relationship is going to turn adverse. You do not want to lose that customer.
At some point, even in cases like those, you’re going to have to try to collect. The question is when? After 30 days? 60 days? 90 days? Every situation is different.
You need to be aware of your Company policy towards bad debt - when to start acting.
Step 1: Gentle Reminder
Your first contact with the debtor should be in the form of a gentle reminder, either by email or on the phone. Say that you’re just making him aware that the debt hasn’t been paid. This approach allows the debtor to save face by claiming he "didn't know" or "forgot". A certain percentage of debtors will pay up.
Step 2: Firm Request
If the gentle reminder doesn’t work, the next step is to request payment.
You’re no longer pretending that you think the debtor may just be confused. No need to be hostile, but make it clear that you are rightly owed the money and you expect either
(1) to be paid immediately or
(2) a definite commitment as to when payment will be rendered.
Step 3: Top of the list
If the debtor doesn’t keep his definite commitment to pay by a certain date – you have to take an even stronger approach.
If he’s simply overextended and doesn’t have the money to pay all the bills he owes, you have to get yourself to the top of his list of priorities.
How do you convince him to pay you before he pays someone else? By constantly contacting him – by a phone call, a SMS, by letter/fax, through e-mail, and maybe even by knocking on his door.
Step 4: Friendly “Threat”
If he just doesn’t feel like paying, you have no choice. You will have to make a friendly “threat” - for example:
suggest that his credit rating with your company will need to be revised
or that the goods may have to be re-possessed
or that you’re probably going to have to take legal action
From The Debt Collecting and Credit Contol Course at Quest training Johannesburg