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Maximise the effectiveness of inhouse Debt Collection

Cashflow can be a serious problem for many otherwise healthy companies. Slow or non-payers are a potential headache for everyone in business. You can either approach this by trusting to luck and hoping it simply won’t happen, or you can set down a strategy aimed at combatting slow and non-payment.

Reconsider your credit granting criteria
Many large companies have very clear credit granting criteria. By so doing, it is possible to save up to 50% on unrecoverable debts. Unfortunately, many small and medium-sized businesses do not operate such a system and are therefore more vulnerable to non-payment.
Specifically, here are some of the steps that you can take to tighten-up your credit granting policies:


  • You should issue your invoices immediately upon sale
  • Your customer should be required to sign a credit agreement
  • You should have a strict 30-day payment period
  • Your agreement should clearly state that penalty interest will accrue on late payment
  • You should issue monthly account statements
  • A telephone reminder should be made to customers past the due by date
  • You should automatically pass your non-paid invoices over to a debt collection company at 60 days past the due date.

Obtain full customer details at sale
You should not make the mistake of not asking for sufficient identificatory details when the sale is going through. You should routinely ask for name, address, phone numbers (work, home, cellphone), National Insurance or Fiscal Code number, passport/identity card/drivers licence serial number. To know what additional information you should ask for, think about what you would need to trace the customer, should he become a non-payer.
With especially important transactions, where non-payment would seriously compromise your business’s financial situation, it is imperative that you carry out more in-depth checks. You should at least get hold of a Company Report which will confirm whether or not there is anything untoward about your customer. Any prejudicial or adverse entries will be revealed. Many companies now carry out screening of ALL their new and existing clients to minimise the possibility of payment default.

Learn the law as it is applied to Debt Collection in your country
Take steps to learn about the interest rates running on overdue sums, procedures and time limits applied to judicial debt collection in your country, in order to dovetail these procedures with your own inhouse collection efforts.

Issue account statements and invoices regularly
You have to remember that a large or medium-sized business has hundreds and even thousands of invoices to settle every year. It is therefore not surprising perhaps that yours will slip out of mind – if you don’t make sure that it is on the top of the “to do” pile in the accounts department. You should have a systematic invoicing system to deal with all your accounts, which issues reminders and final demands according to a pre-arranged timetable. You could even speak with your chosen debt collection company for advice about this – to maximise their efforts should the account be passed to them for action.

Make sure you follow up “bounced” mail with the post office
Most countries have post office procedures which will reveal a forwarding address or, indeed, some customers have paid to have mail sent to them at their new address. Look carefully at any return information issued by your post office and make enquiries to see if they can help further in tracing “gone aways”.

Be thorough, but fair
Make sure that your accounts department has a clear series of procedures to follow so that you only grant credit where the customer fits your criteria. Stick to the timescale of procedures you have set up – don’t deviate from this without clear justification. Think also that one of your goals should be to preserve the business relationship with your customers – so where there is genuine financial hardship try to meet him halfway.

Invest in your accounts department
Your accounts department is an important part of your business, who can give you early warnings of impending payment problems. Make sure that they have the latest software and training at their disposal so that you can maximise their performance. Have regular meetings with them to assess how many payments are being received and which are outstanding, so that you can intervene early.

Stay on top of your customers
It is no use sending a reminder, then waiting 50 days before sending a further call to effect payment. You should aim to contact the debtor every 10/14 days or so after the first reminder, to ensure that your account is always to the forefront of his mind. Where no payment has been made at 2 to 3 months after the original invoice was issued, you have to consider external debt collection. Statistics indicate that after 3 months inhouse collections procedures are no longer effective (less than 20% have any positive outcome). The intervention at 60-90 days post invoice of a good debt collection company should be more effective.

Comas srl, is an Italian, ISO-certified company operating in the Debt Collection/Commercial information field since 1976. For further information:



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