How to collect outstanding debts without losing clients

So, let’s face the facts, collecting money is a job most businesses try to avoid, even though their poor cashflow warrants a debt collection mechanism. Most businesses’ behaviour when collecting debt is very abusive and aggressive. So what is the best practice, without becoming too aggressive whilst maintaining a civil business relationship?

It is important to remember that the debtor is probably embarrassed, stressed and will likely become defensive, so try to be firm but understanding and patient. It usually goes a long way when you try to provide an openness for your debtor to explain its late payments. This will allow you to budget for the expected monies and arrange a solution such as an Acknowledgement of Debt (AOD). Receiving a signed AOD may be easier to achieve with an understanding attitude.

All businesses trying to collect money, even if the amount was agreed at the time of the sale, may require some negotiation. During these dire economic times, many businesses have the best intention of settling their debt, but circumstances beyond their control have gotten in the way. This is the current reality for smaller businesses as they should be paid first by bigger suppliers, but the suppliers choose to settle the small company’s account later than the indicated term.

Here are a few tips when trying to collect outstanding monies:

  1. Understand the negotiation process. Negotiations are a process and it requires an understanding of the billing, credit approval and payment processes. In our current economy many people are found in situations beyond their control and cannot pay their debts and one need to be lenient and negotiate in such situations.
  2. Focus on a win-win solution which means both parties feel like they benefited during the collection process. Try to be firm and limit what you do to reach an agreement acceptable by both parties.
  3. Be patient. Patience is a virtue and, in some instances, when you rush, it might lead to not getting paid at all.
  4. Be confident, but do not make the mistake of being arrogant or rude. Confidence is gained through experience, and the more debt collections you do, the better.
  5. Develop your listening skills. The two biggest mistakes you can make are not listening or interrupting a debtor. Sometimes all it takes is listening a little longer to get key information to assist in your collection efforts.

Being a successful debt collector of your own business takes time, effort, and energy. You need to work at it, invest the time learning skill of negotiating, and be firm. Every business will have to make a collection call or send a collection letter at some point; these tips can help make that a less painfull experience for you, your staff and your customers.

Erasmus Botha Incorporated is a law firm which is passionate about supporting entrepreneurs and business managers to succeed. For legal assistance with contract negotiations, risk management or debt collection, connect with


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