How to Collect a Debt from a Client

How to Collect a Debt from a Client

In a perfect world, all clients would pay their fees and invoices on time. There would be no need to worry about chasing debts and businesses would be free to grow.

Unfortunately, there are always those clients that seem to try every trick possible to avoid paying what they owe. Every small business owner knows how frustrating this can be, with time and money being spent to recover unpaid fees.

Every type of business is affected by bad debt and non-paying clients. The question on every business owners mind is how to collect a debt from a client.

How to Collect Debt Effectively

Knowing how to recover unpaid invoices and debt is one of the many tasks business owners need to perform. Ensuring that the business has a stable cash flow and that clients pay on time is crucial. Here are some basic steps that many businesses use in their collection process.

Get Proof of the Debt’s Existence

Before taking any further action, you should gather together all documentation that proves the debt exists. Examples of this could be an invoice, a receipt or a delivery note. Alternatively, you can find any recorded correspondence such as phone calls, emails or even letters and cheques.

Any payment terms or signed contracts are also invaluable at this point.

Gathering all documentation at this point ensures that you will be in a good position to begin the debt collection process.

Chase the Client for Payment

Once you are prepared, it is time to contact the debtor directly. This should always be done in a professional manner, and you should politely remind them that payment is due.

It is always best to send a letter through recorded delivery, as this way you will know when the debtor receives it.

You should allow a reasonable amount of time between reminders, as chasing them too much might be seen as harassment. A good schedule to follow is:

• First reminder sent within 14 days of the payment being overdue
• The second reminder sent between 14 and 30 days of the payment being overdue
• Final reminder (Letter Before Action) sent if the payment has still not been made after 30 days

Send a Letter Before Action (LBA)

An LBA is a document that informs the debtor of your intent to escalate the matter should payment be withheld. If your debtor has not responded to any reminders, it is a good idea to send them an LBA. Professional debt collectors normally offer this service at a low cost.

An LBA can often prompt a debtor into making payment, as the promise of legal action might be too much for them.

Setting Up a Payment Plan

In many cases, it is better to work with the debtor to come to an amicable conclusion for all parties. Some debtors may simply be unable to pay the outstanding amount in one lump sum.

If this is the case, you should arrange a payment plan that will spread the cost over an agreeable time frame. This ensures you are paid and the matter is resolved.

Hire a Professional

Once all other options have been exhausted, it is time to hire a professional.

Many solutions exist, but the most beneficial option is to instruct a professional debt collection agency. An agency will provide an effective and low-cost service. This negates the need for long and drawn-out legal action with expensive court fees.

If a client has not paid on time and you need assistance recovering the debt, speak to Frontline Collections now. Our friendly debt collection experts will perform a free pre-action assessment of your debt, and give you a clear idea of your options.

How to Collect a Debt from a Client – Frequently Asked Questions

What is the best way to collect a debt?

Fortunately, there are many options for debt recovery. The best option is to instruct a professional debt collection agency. An agency will be able to recover debt quickly and at a low cost. For more information on how a commercial debt collection agency can benefit you, speak to us today.

What can you do if a client doesn’t pay?

If a client does not pay their outstanding debt, the key thing to do is remain calm. Being owed money is a frustrating experience, but keeping a level head is the best solution. Consider your options carefully and research all elements before committing to a specific course of action.

How much does it cost to collect a debt?

Every case of debt is different, and so must be priced individually according to its own circumstances. Most debt collection agencies operate on commission. Frontline Collections has the lowest rates, with commissions starting from as low as 8%.

How long does it take to recover a debt from a client?

Collection times tend to vary according to the complexity and number of debts within each case. Regardless of this, a professional debt collector can provide an estimate when they know more about the case itself.

Can a debt be recovered from someone in another country?

To the right debt collection agency, recovering an international debt presents few challenges. Frontline Collections, for example, has collected thousands of international debts for both businesses and private individuals.