How should I collect debts without damaging the business relationship?

While collecting overdue debt is always a sensitive issue, you don't want to compromise your cash flow cycle for a non-paying customer. However, you probably don't want to put the professional relationship with your customer or supplier on the line, either.

There are two main things to consider in this situation:

  • How many days is the invoice overdue by?
  • What is the reason for non-payment?

If the invoice is five days to a week late, for example, you can assume that the bill has somehow been overlooked and gently remind your customer by dropping them an email or giving them a phone call. If there is a response and your customer tells you they are unable to pay due to financial stress, you can consider implementing a payment plan, but you should fully research your debtor's financial position first before doing so.

If they do not respond, you should continue sending polite but firm reminders until the invoice is around 60 days past due. At this stage you can consider taking further action such as referring the matter to a debt collection agency, but you should always keep your customer informed of your next move.

 No one likes chasing up customers for payment but at the end of the day, it's money that is owed to your business and has a big impact on your cash flow cycle.

Read more on how to manage bad debtors  and how to successfully negotiate a payment plan with a problem debtor.

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