For most business owners cash is always tight. Cashflow management is an unavoidable part of self-employment. The most immediate way to solve a short term cashflow crisis is to collect all those outstanding invoices your beloved customers haven’t paid yet. Despite the fact they were due 2 week ago! It’s time to call in your debt.

Before we start let’s be honest with ourselves, no one likes chasing money. The conversation can be awkward and we often feel like the call will damage our working relationship with the person. The reality is most of the time your customer may have simply forgotten to make the payment and will rectify the situation soon after the call. However, if the customer is consistently slow paying your bills they may not be the right customer for your business anyway.


Who makes contact about customer debt?

When I’ve posed this question to my business clients the overwhelming response is “I should! It’s my business”. While I agree the business owner certainly has a role to play in the process I like to explore other alternatives first.

My personal preference is a 3-stage approach:

  1. Automated reminders – most modern bookkeeping software, for example Xero can send automated debt reminders for overdue invoices. You can customise the reminder message and tell the software how many days after the due day the customer should receive an email. Standalone options can also be used to email or SMS reminders to your clients. You might want to look at options like Debtor Daddy.
  2. A dedicated Accounts Receivable person – where possible the initial phone calls are handled by your accounts receivable clerk. That way the awkward conversation is between the customer and someone other than the person the customer has the primary working relationship with. This can mitigate any damage to the customer relationship.
  3. Now it’s your turn! If the automated reminders and phone calls by your team members have failed to yield a result you need to step in and call your customer directly. In my own Business, Panic Atax, I have a general rule about customers without unpaid invoices. If any client on my list needs more than one call from me in regard to the same invoice I end the working relationship. My time is better spent looking after clients who value my services enough to pay my bills when they are due. That may seem harsh but as a mentor told me many years ago when I first joined the accounting profession “we are running a business, not a charity”.


How to approach a debt call


Step 1 – Preparing to make the call

Before you call the customer make sure you have all the relevant information. You will need their contact information, total overdue amount (including invoice numbers and descriptions) and it’s important that you have a clear understanding of how many attempts have been made to follow up the debt, either via an automated system or calls from your team.

What options are you willing to give the client? Can they enter a payment plan for the debt? Will that incur interest? You don’t want to be working through these questions in your head while you are on the call so have a firm policy, read it before the call and enforce it during negotiations.

I also recommend you double check your accounting records. There is nothing more embarrassing in this situation than calling a customer about a debt they have already paid. It makes you and your business look bad.


Step 2 – Place the call

It’s important to clearly identify yourself and to confirm you are speaking with the right person. Depending on the business you may speak with the Owner, the Manager or the Accounts Payable Clerk. If the call goes unanswered it’s important to leave a message but I’d recommend you avoid mentioning that the call was about outstanding invoices. Who you return a missed call from someone chasing money?

Once you have confirmed you are speaking to the right person it’s important to remain calm and professional. Remove the emotion and judgement from the situation. Like I mentioned earlier more often than not there is a perfectly good reason for issue. Your goal is to get a firm deadline from the customer. A commitment to pay the debt by a specific date. Stay focused on that outcome. Your silence can be a powerful tool. Make a statement, for example “I need payment in full by Thursday afternoon” and then allow the customer to process that and answer. Shift the burden of negotiating onto them.


Step 3 – Document the outcome of the call

Regardless of the outcome of the call make sure you document it. Email the client to confirm what was discussed and the promises made by each party. It’s important that everyone involved is clear on what is expected and that, ultimately, the debt is paid.


Interested in more tips on how to manage your cash flow? Talk to our team about Profit First!.