• New Wave Accountants

How to Manage Your Overdue Payment Collections - Our Guide

Collecting overdue payments and debt might be an uncomfortable aspect of managing a business, but it is essential. Often, customers merely forgot to pay, and a gentle reminder would be enough to resolve the issue. However, sometimes, customers will make you work to get those payments.


It’s best to stay on top of these overdue payments through a combination of preventive and reactive actions. Here are a few ways you can recover outstanding fees without damaging your business relationships.


Have a Clear Outline of Expected Terms of Trade


It’s best to be clear from the get-go before you begin a business relationship with a customer.


  1. Make sure both parties have a clear understanding of the terms of the trade, especially the payment.

  2. Inform them of their payment options and relay this information again through each invoice.

  3. As much as possible, set specific invoice dates and payment deadlines, so customers know when they are expected to make their payment.

Encourage Prompt Payment Through Effective Invoicing


When you efficiently invoice customers, you encourage them to pay promptly. Make a habit of sending them their invoice upon completion of the job so that it’s still fresh in their minds and won’t be easily forgotten. Keep regular communication with your customers and offer an incentive of a small percentage discount for early payment.


Send Regular Payment Reminders


If the payment deadline has passed, send your customers a friendly reminder regarding their overdue payments. It is possible that they simply forgot or deposited the amount in the wrong bank account. Sending a friendly reminder can help them resolve this.


If the next payment period has come without a response from the initial reminder, email them again or give them a call. And if the customer is still ignoring your reminders despite extending the payment dates, it’s time to send them a final notice to pay.


Make Direct Contact


If your efforts to contact them through email, text or call have yielded no result, it’s time to make direct contact with the customer. Visit them at their establishment or send someone over to collect the payment in person. Be advised, though, that this could potentially damage the business relationship you have with the customer. Although, it would probably be best not to continue conducting business with unreliable people.


Issue a Formal Letter of Demand


You’ve done all you can to remind them. You even showed up at their place of business to directly collect the payment but to no avail. It’s time to issue a formal letter of demand. Nobody wants to escalate a simple overdue payment to legal matters. But you had a contract, and not making payments and ignoring reminders is a breach of that contract. Sometimes, you have no choice but to surrender to the last resort.


Acquire the Services of a Debt Collecting Agency


To avoid personally involving yourself in the hassles of debt collection, you can acquire the services of a debt collecting agency instead. Just make sure that the debt collector you hire abides by the law and doesn’t follow any banned debt collection practices.


Conclusion


Making clear agreements and expectations at the start of a business relationship with a customer can help avoid the drama involved in debt collection. However, you can only do so much to prevent overdue payments from occurring. Sometimes, we have to do the uncomfortable stuff to keep our business afloat.


To avoid money problems in your business, you can trust New Wave Accounting for solid advice. We are a small business accountant on the Gold Coast that provides end-to-end accounting and bookkeeping services for small businesses. Contact us today to get started!



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