Communicating with your debtor

James Salmon, Director, 22nd May 2019.

Communicating with your debtor is essential.

But too often, people shy away from difficult conversations.  They prefer to send an email or post a statement in order to avoid the awkwardness of asking for the money that is due.

“They’ll pay in the end” they reason. “If they had the money, they’d pay” they argue. “They are an important client, I don’t want to upset them” they tell themselves.

It is perhaps a distinctly British view but we don’t like chasing payments and that fuels the late payment culture in the UK.

See our recent post – Embarrassed to ask for payment?

But as the famous television British Telecom advert once told us, “it’s good to talk”  and it is especially true when you are owed money.

Good communication holds the key in so many aspects in business. From keeping staff motivated and happy to negotiating the best terms with suppliers, it’s crucial to fostering strong relationships with each stakeholder. However one of the most important forms of communication is a business’s communication with its customers.  Many focus on winning new business and getting orders from existing clients, but just as important is communicating about payment.

In larger businesses where there is a dedicated credit controller or credit control team it can be less of an issue. But in smaller businesses where chasing payments falls on the shoulders of those employees who have other tasks, or even is done by the owner,  it can be easy to prioritise more interesting or perhaps if we are being more honest, less challenging tasks.

It is easy to focus on chasing business, delivering the goods or services or other core activities. Debt collection after all is just “admin” and who wants to do admin?

But if you don’t get paid for all the work you win and deliver then you are not going to have a business to focus on.

Not many of us only do the work we do for the love of it. Most of us also want to be financially recompensed.

Research suggests that the majority of businesses only spend a few hours a week on credit control. It is mostly an after thought. Something to do when there is nothing else to do.

However, with late payments being one of the biggest causes of business failure; with the UK stuck in a late payment culture, giving only a few hours to the business of getting paid will not resolve it. When we only have a few hours, we focus on the customers who owe the most, the ones who are latest and those with smaller and younger debts get a free pass and chasing is delayed until it becomes serious.

How should you communicate at your debtor. We look at the when to communicate and also warn about the things you should never say.

The five times to contact your debtor

Rather than wait until the account is seriously overdue and the customer has reached their credit limit, CPA are going to suggest you contact them much earlier. Here are our seven times you should communicate with your customer about payment.

1) when they become a customer

As soon as a new customer comes on board, communicate clearly  to them your credit terms and the actions you will take if payment is not adhered to. Spell out that you will add interest and apply late payment compensation as legislated for in the under The Late Payment of Commercial Debts (interest) Act 1998 and subsequent legislation. Explain that if the payment terms are not adhered to the account will be suspended and you will potentially refer the matter to a third party collector and/or take legal action to recover the sums due. Be polite but straight. By setting the ground rules from the beginning you can anchor the relationship to good credit management practice.

2) When they place an order

Again when they place an order, make sure you remind them again of your credit policy and that you will expect payment to arrive on or before the due date.

3) Once you have sent the invoice.

Contact your customer after the invoice has been sent to make sure it has been received and  that there are no disputes. Verbally confirm the due date. This provides the perfect opportunity to identify any potential issues immediately and start to build a rapport, whilst demonstrating an organised and professional approach to credit control. This is usually the first time your credit controllers will have liaised with the customer, so it’s important to make first impressions count.

4) Contact them just before the due date

Put your invoice at the top of their to do pile! Contact your customer in the days leading up to the invoice due date and make it clear to them that the payment due date is the payment due date, and not just a suggestion. It immediately tells them that you know payment should be coming soon and could encourage them to give it their attention.

There can be no excuse of forgetfulness after it is due. It also allows you to find out about any snags that have come up and gives you the chance to address them and find solutions.  Again you can spell out your clear credit policy and apply a bit of pressure – the iron fist in the velvet glove.

And hey, why not also take the opportunity to sell to them again, “by the way, do you know we currently have an offer on……”.

5) Contact them after the due date

Well that payment date has been and gone and no payment has materialised, no matter how often you recheck the bank account. Contact them and let them know, you know.

There is probably some excuse, it might even be a genuine one and there might have been an innocent mistake or the payment could be already on its way.

However the quicker you contact them, the quicker you can get passed that hurdle. Some businesses will be in contact within 24 hours of the due date, others will give customers a little more slack. Whatever your policy, don’t wait too long. You’ll want to apply some pressure, but the tone of this call will usually be quite friendly in order to encourage payment as quickly as possible.

6) Apply the pressure

They’ve used up their excuses now.

Both the timing and the tone of your this communication is going to depend on what they said last time. Unfortunately it is rare that any two situations are the same, so you are going to have to use your initiative whilst adhering to your company credit policy. If it has got to this point, however, it is unlikely that “Mr Nice Guy” will work, meaning it’s time to get more assertive in your communications.

Remind them that you have previously dealt with the previous excuses. Now is the time to pay. now is the time to take that velvet glove off the iron fist.

Now is the time to spell out those consequences of late payment. Late payment legislation gives you the tools, use them. Ask for interest and compensation. And spell out how you are going to escalate action if payment continues to delay and spell out how this is going to cost them more in interest, that if you refer it to a debt collector, their charges will be added and if you are forced to litigate, then those costs will be added to the debt too, further increasing the cost to your debtor.

Many businesses are wary of pushing too hard out of fear of damaging the customer relationship, but what value is a non-paying customer? And if you let them slide this one time, they won’t respect you and will try it again.

Fact is, if you are assertive in expecting payment, customers pay and accept it. They usually see it as a sign that a business is well run and organised and are therefore happy to continue to do business with them.

7) Ask for help

If they still haven’t paid, then its not about you – its them.

We all have some good payers, we have a large number of late payers but then we have your bad payers who just ignore you.

If your attempts to get paid simply aren’t working, Don’t be afraid to call in the cavalry!

Spending too much time and energy on individual customers who are resisting all forms of communication can be hugely damaging and divert attention away from other customers. Defeat doesn’t have to mean giving up.

Sometimes the hardest call to make is the one asking for help, but it can also be the most rewarding. Passing the matter to a third party like the Credit Protection Association can quickly change the conversation and bring the debt to resolution. CPA resolve 84% of debts referred to us  within 18 days on average, even though many of the debts have been outstanding for ages when it is referred to us.   Our overdue account recovery service is available to members of the association at no extra charge above their subscription.

7 things you should never say when chasing payment

On our blogs we often talk about all the things you should do if you want to be paid on time. But what about the things you shouldn’t?

Here’s the  list of 7 things that you should never say.

1. “How much do you owe?”

Never let your customer dictate what is due. You are the authority and should be on top of your ledger. Make sure before you contact them that you  know exactly how much a customer owes. Asking a customer how much they owe not only gives them the opportunity to lie, it also gives the impression that you’re disorganised and suggests they may be able to get away with not paying on time.

2. “I can’t find your invoice”

Whilst it’s common for your customers to say this, you should always be able to find a customer’s invoice in the event they call either to pay, ask for a copy or raise a query. It’s important to always have accurate records of all invoices and keep these easily accessible at all times.

3. “Oh, don’t worry about signing the terms and conditions”

Your business’s terms and conditions are so important when it comes to getting paid, but they’re pointless if you don’t get them signed by your customers. Not having signed copies could mean you have nothing to fall back on should you need to take enforcement action against customers who refuse to pay your invoices.

4. “We only accept cheques”

Not only do cheques take days to clear, they also open the door to one of the most famous late payment excuses, “the cheque is in the post”. Moreover, they don’t give your customers enough choice when it comes to payment. Where possible, try to offer a range of payment methods as this makes it easier for your customers, which will increase your chances of being paid on time. Give them your bank details and if possible accept either card payments over the phone or via a web portal.

5. “That will do”

Don’t be quick to settle for late payment.  And don’t be quick to accept part payments, instalements or even worse settle for less than is due unless there are genuine justifications for doing so. Whilst at times it can be necessary to accept a lesser amount, if you regularly view credit control as a re-negotiation of the contract then, your customers will come to expect it and it is the route to financial difficulty.

6. “What’s late payment compensation?”

Know your rights under late payment legislation. You are entitled to compensation and interest under the law if they pay late. Not only does the Late Payment of Commercial Debts (Interest) Act give businesses the right to charge their customers compensation and statutory interest on any overdue invoices to help cover the debt collection costs involved, it also tells your customers that you take late payment seriously and will often encourage them to pay on time.

7. “I hate asking for payment”

Chasing payments can require a lot of time and resources. But it is essential. You need to want to get paid. If you don’t want to do it, find someone willing to do it.

Asking for payments when due should not be embarrassing for you – its your customer who should be embarrassed to have paid late. Own it!

If you can’t find someone with your organisation to do it,  why not ask the Credit Protection Association to chase the debt on your behalf. it. Our passion and commitment to the job, combined with their extensive expertise, will often see better results.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply to retailers like Select or small ones, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

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Are you owed money?

With pressures on the Uk business it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.

We have seen a succession of big names go into insolvency this year and if they can get into difficulty, you can’t just assume your customers can and will pay you, no matter how big their name is.

It is essential to have credit management systems in place to monitor and check your customers credit worthiness.

It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

See the section below – About CPA.

Are you also at risk of collapsing?

If you are struggling, rather than shutting down, do you realise you may have a hidden source of capital within your business waiting to be activated?

We can help you uncover a hidden goldmine, you didn’t even know you were sitting on.

If you trade with other businesses and were often paid late then you could be entitled to significant compensation.

Under little known and underused legislation your business could be due huge amounts in compensation that you didn’t even know about.

That compensation could be the cash rescue your business needed.

How can CPA help?

CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.

We do the work, you receive the cash.

If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.

We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.

We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.

CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

Under little used legislation, you are entitled to compensation for those late payments.

Now you can boost your own cash-flow.

CPA can help unearth the those hidden treasures.

We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.

Yes, CPA can help you boost your business cashflow.

Don’t let your bankers control you, contact CPA today.

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

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How to overcome 25 of the most common excuses for non-payment

Discover how to improve your cashflow in 3 steps.

Read our blog – Debt collection agency

Read our Cash Flow Advice

Read about our overdue account recovery service

Read our blog – What is credit management?

Read our blog -What is a credit management company?

Read our blog -Credit Management that works!

Read our blog – How to select a debt collection agency

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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections