The Debt Collection Habit That Could Save You £1,000s and Increase Cashflow For Your Business

Debt collection: The Chapter Technique

As business owners you might be thinking, what is the best way to stop my business from falling into the trap of poor cashflow and piling up debts that could threaten my business.  It’s a very real worry, and we all know that cashflow is the lifeblood of any business. So it is basically survival in a very competitive modern-day marketplace.

As a professional debt collection agency, we decided to put together a method of debt collection that completely falls into line with best practice used by the top performing companies all around the world, is easy to implement quickly and will get you results almost instantly.

So we gave it a name. And called it The Chapter Technique.

Think of it like a book, and you need to perform each stage before you take on the next. Otherwise the book won’t make sense (you won’t collect your debt).  But each time you read each chapter, you will get closer to the goal of the book (i.e find out the ending), and to collect your debt.

Chapter 1.

Pre-sale. Credit check your customer thoroughly.  By that we don’t just mean check companies house for their last set of accounts. A lot can happen in a year since they were published.  Use current systems such as Credit Safe who will give you up-to-the-minute information on every company in the UK.  Follow that up with calls to their customers and check if they have a good relationship. Do they pay on-time, what are their processes like… this on-the-ground info can be priceless in assessing a new customers trustworthiness.  Make sure you explain to the new customer you are performing these checks. Generally if they are a reputable firm they will often welcome the thoroughness of your approach.

Chapter 2.

The sale.  Once you make a sale ensure you have all the correct contact information for the customer.  So many times we see people trying to contact the wrong people when collecting a debt. You will need telephone, email, trading address (if different to registered address), name of accounts person, name of Director.  Make sure your sales people are well-trained in gathering this information and performing chapters 1 & 2 when prospecting as this is laying the foundations to prevent any problems later with debt collection.

Chapter 3.

The Invoice.  When work has been completed, do not delay the billing process, or wait for a monthly cycle to raise your invoices.  Send them out immediately on completion of work (or even better during) once all the rates have been agreed.  Send by email primarily because then you have proof of receipt.  Be sure to include crucial information as follows:

• Your company name and address
• Your contact details (telephone, email address, fax)
• Contact name for queries
• How much is payable
• Payment terms
• Bank details
• Alternative methods of payment you might accept (cheque, paypal, credit card etc)

If nothing else, remember 1 thing about your invoice: it is a notice-to-pay.  So therefore the customer needs to be clear on 2 things: how much is due and how they can pay it. 

So many times we see invoices that are ambiguous and customers simply push them to the bottom of the pile.  We also see that incorrect invoices are the no.1 reason for late payment – so make sure you get it right first time!

Don’t get frustrated by late payment – stick to your proecdure!

Chapter 4.

Internal Collection Process.  This should be a standardised procedure and will need 1 person managing the entire process. Then you can keep track of the situation easily.  There should be a time-table of events, starting from Day 1 of the invoice, and to keep things simple follow 3 steps:

Step 1. 7 days before your invoice is due call your customer make sure they have a copy of the invoice

Step. 2 On due date (usually 30 days) call or email your customer to remind them payment is due and ask them for an exact payment date. (if they need a reason, it’s so you can schedule this into your cashflow forecasts)

Step 3. 7 days after the due date, if they still haven’t promised payment, remind them the invoice is overdue. State clearly that continued non-payment will result in Interest and Charges being added to their account

Chapter 5.

External Collection Process.  Once a debt has reached a period of roughly 60 days beyond Invoice date, you would usually look to an external agency to collect the debt.  It is proven that the chances of collecting debts in-house after 60 days are significantly reduced after this period because you lose credibility in collecting, and your customers think you are a soft touch and they can get away with it.

The longer you leave a debt for collection, the more difficult it is to collect, even for an external collection agency. Many factors can come into play once a debt is aged:

• Debtor could have stopped trading
• Debor could be insolvent
• Debtor could have absconded or gone away
• The old contact may have left the company
• Telephone numbers may have changed
• Office address may have changed
• They could have merged with another company

So you can see that it is critical that the debt collection process is managed with very strict time-table to maximise fully the chances of collection, and keep your business in positive cash-flow position.

Chapter 6.

Legal Action.  This should be the last resort in most cases.  Once you have tried all methods of debt collection and attempted to contact the debtor, you should consider contacting a solicitor to consider legal proceedings against the debtor.

This will secure your debt, providing the business intends to continue trading, and guarantee the value of your debt against any assets the company has.  An enforcement process can then be started, which involves instruction to the High Court to remove goods from the premises of the debtor.  It is essential however that full credit checks are carried out on the business prior to any legal action in order to secure your debt.

So that brings us to the end of The Chapter Technique, and we hope you find the techqniue useful for your business to collect debts and have a very prosperous business,

If you are struggling to collect business debts in your business, please don’t hesitate to give us a call on 01332 565 350 or email enquiries@tauruscollections.com for a no obligation assessment of how we can help you out.