Debt Collection 101 Part 1 – What to do when customers don’t pay


Jun 17, 2015

Collecting overdue accounts can seem to be a major hassle for SMEs, but the impacts of not staying on top of debtors can be devastating to business. Whether you’re a small or medium sized business, you deserve to be paid on time – no matter who your customers are.

Over the next few weeks we will share with you 10 easy steps to manage debt collection and cash flow issues in your business…

Part 1 – Avoid bad debts through preparation

1. Set clear credit policies at the outset of any credit agreement

Be clear about what you expect from the very beginning. Customers will often have their own credit policies, such as paying after 45 days. If it is your policy to only extend credit for 30 days you need to decide whether you want to play by your customer’s rules or pass on the business.

2. Get a signed contract

A credit contract doesn’t need to be a complicated document that takes a significant amount of time and resources to prepare. It can be as simple as spelling out what you will provide and when; what the customer must pay and when; how disputes are to be settled; and penalties for late payment.

3. Always conduct a credit check before extending credit

Credit checks can save lots of heartache and prevent the burden of customers that can’t or don’t pay on time. By providing you with an overview of the financial health of a prospective customer, a credit check allows you to make an informed decision about the extension of credit.

Next week Debt Collection 101 Part 2 talks about ensuring your business has a sound process in place to track and collect accounts receivable. For more information, read Part 2 here.

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