Does someone owe you money? Has your business delivered goods or services to a client that has not paid you? If so, you may be considering the best ways for you to recover your money.
The reasons for this situation are varied. A private individual might be owed funds from a friend or family member that they loaned money to. Small businesses, sole traders and those that are self-employed are normally owed money from non-paying clients.
Being owed money is always a frustrating and challenging experience, and knowing how to resolve the matter can help enormously.
Recent studies have shown that one-third of small businesses are owed money, with a high number of them admitting that they are struggling financially as a result.
It is of critical importance that you recover any money that is owed to you. Failure to do so could result in you struggling to meet your own financial requirements, or could put your business at risk. If you are owed money, you should take action as soon as possible.
Top Debt Collection Tips
If someone has not paid you what they owe, there are several steps that you can take to help collect the debt.
Don’t Panic and Remain Calm
It is a fact that it is very stressful to be owed money. As well as the obvious frustrations, many financial implications can result from having someone owe you money.
All of these feelings are completely understandable, but you should always try to remain calm.
When speaking with the person that owes you money, you should maintain a professional tone. One common tactic debtors use is to try and provoke the person they owe money to and play on their emotions.
If you let your feelings get the better of you, a conversation may turn into an argument. An unscrupulous debtor may then try to use this as grounds to withhold payment.
As with any financial matter, you should always take steps to record and document everything. Doing so may help at a later stage if you need to refer back to anything.
For instance, if you were to loan a friend a large amount of money, you should create a proper agreement beforehand. This should include specifics such as the amount you are owed and when it is due back. You should also ask the person to sign the agreement.
If they decide not to pay you later, you have proof that they agreed to do so before you gave them any money. If they refuse to sign anything, then it could be a sign that they never intended to repay you at all.
You should also make a record of all communication between you and your debtor, as well as only using methods such as letters, emails and recorded phone calls when doing so. This will all help if you need to refer back to something later on.
Send a Polite and Professional Reminder
If you are in a position where somebody owes you a payment, you should always try to contact them by sending a reminder. It is a fact that you are owed money, there may be a simple explanation for this. Sending a polite reminder can, in many cases, prompt the debtor to pay right away.
Your letter should be professional, clear, and remind the debtor that the money they owe you is now due to be paid.
If you are sending a reminder letter, you should only use either recorded postal delivery or an email with a read receipt. Many debtors that do not want to pay will claim that they never received any reminders when you later question them about it. Sending a letter in this manner will help to prove that the message has been sent and accepted.
It is appropriate to send at least 2 standard reminders. For example, most businesses have payment terms of 30 days. It is normal to send the first payment reminder between 1 and 14 days after the payment was due. If the first reminder is not successful, a second reminder is sent between 14 and 30 days.
Send a Final Reminder
If your reminders have been ignored, it is time to send a ‘final notice’ that outlines your intent to take the matter to a higher authority (such as a debt collection agency or to a small claims court).
In some cases, this can be enough to prompt a debtor into paying what they owe, and so it is always a valuable step.
You should allow a debtor a reasonable amount of time to receive and respond to this letter, and if payment is still not made during this time window, it is time to involve a professional.
Hire a Debt Collection Agency
A debt collection agency will be able to help recover money that is owed to you promptly and professionally.
It should be noted that when searching for an agency, you should try to find one that specialises in your specific type of debt.
For example, Federal Management is known as the UK’s leading business debt collection agency and should be used if you are a company that is owed money.
In contrast, Frontline Collections are specialists in private debt collection and are experts in recovering personal debts, or money owed to small businesses and sole traders.
Debt collection agencies are the most effective way to recover money that is owed, however, they do incur a small cost. Many operate on commission based pricing structures, and this should be taken into account during the decision making process.