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In normal circumstances a firm will require a bill to be settled in the month after the bill date but this must be stated in the contract and agreed by both parties, in writing. In the absence of such an agreement then in the event of dispute the law defaults to 30 days from the bill date as the last date for payment. Late payers can be the bane of small firm finances, as there could be a regularity to some; maybe they settle two months after the bill date or maybe they are frequently on time but are on occasion late. In any event it makes planning tough for the small firm to plan the future projects as they may have to pay for stock items that were used for the job concerned and whilst they may well have cash to pay their suppliers, they may have to commit to further supplies for other work and pay salaries, naturally. The late payer can cause difficulties in creating a shortfall in the books later on when it is time to pay their own bills, so how can the small firm advise the debtor to pay up without losing a valuable client? In any event the last thing the creditor wants to happen is to have no option but to write off a debt, so they must make the effort to collect them.
For a small firm the option may well be between managing the Debt collection internally, handing it over to a solicitor or commissioning a Debt collection business. The last two options can involve significant costs for a small ]company and so may be discounted by many. The in-house route will call for commitment in employee time, but by the use of a well written Debt collection software package the time spent can be optimised to do the work efficiently. Some applications are inexpensive, not cheap, and are on sale for under £50 including VAT. They might include either templates for the Debt collection letters or examples and instructions in the accompanying manual or e-book. These Debt collection letters are at the centre of the Debt collection process as they are what the debtor will see and can make or break the success of the process.
The Debt collection letters should be written in cool, unemotional and formal ways so that they don’t upset the debtor, whilst likewise demonstrating to them that the creditor is determined. Ideally the Debt collection software should include templates as this ought to make the experience of writing the Debt collection letters uncomplicated, next best would be an e-book, such as a pdf file from which sample Debt collection letters can be taken and then changed to customise them for the debtor firm. The least preferable method is to have to manually create a letter from an instruction manual as this it time consuming and can introduce errors, which are NOT wanted in Debt collection letters.
The e-book should lay out the stages of the Debt collection process and the Debt collection software should similarly use these stages for carrying out a Debt collection action. This procedure should recover many debts and will hopefully be a reminder to the debtors that you must be paid without delay next time. However with a view to needing to escalate a debt to using the legal system should the in-house process fail; the Debt collection software should have the functionality to record the activity at each stage of the process, covering those carried out when using the Debt collection software and external activity, such as incoming letters. In this way there is evidence that the creditor has made serious efforts to carry out the Debt collection already.