Our Own Debt Collection Process

Following on from our article last week ‘debt collecting – top tips’ we have received lots of requests from clients for further help/information about this – after all, this time of year is notorious for being difficult to extract cash from customers. So we have now put together some practical advice on the process you need to follow to implement the same debt collection process that we have used so successfully – have a read and see what you think!

Note: We at K. A. Farr & Co. have applied these principles & reduced our debt by 50%.

Debt Collection Process

Debt Collecting Process

Having set your credit terms and put these terms on your invoices, the next vital step is to monitor when accounts become overdue (via an Aged Debt report) and then follow our simple process below:

N.B. during all calls (remember not to be made by you but by another member of your team) reiterate that you accept debit/credit card payments over the phone.

Call 1: When?

To be made 1- 2 days after debt falls overdue

  • Ask the customer when you can expect to receive payment & make a diary note to follow it up after that date. Get them to commit.

Call 2: Why not?

To be made 2 days after expected date of payment

  • Find out why the customer hasn’t met the commitment they made during the previous phone call.
  • This time ask them if they will please make payment within the next 7 days & diary it again to follow up immediately after that date.

Call 3: Last one

7 days later

  • Tell them you are disappointed to note that you have still not received payment, find out why not. Try & obtain a commitment to pay within 7 days. If the customer has a problem take all the details and pass it onto the business manager or owner to sort out.
  • If the customer becomes heated, rude or abusive, exit the call and refer the problem to the manager or owner.
  • Wait 7 days and if still not paid send letter 1.

Letter 1: 7 days

  • The first stage letter reiterates your credit terms and asks for settlement in full within next 7 days, if not paid send letter 2.

Letter 2: Or else?

  • Letter 2 tells the customer that if they don’t settle in full within 7 days you will take legal action (last chance to pay!). If not paid send letter 3.

Letter 3: No more

  • Letter 3 tells them that if payment isn’t received by (name the date – 7 days time) you will appoint a debt collection agency to deal with the matter (and without any further warnings).

So go ahead, try implementing this today and you too could reduce your debt & improve your cash flow overnight – it really is that easy!

For more information or to discuss this in more detail call us on 01704 211434 or email info@kafarr.co.uk.