They Owe Me Money And Won’t Return My Calls

Are you a business owner and living from one week to the next? You have a couple of employees that you pay on a weekly basis and the bank account total is getting low? You have debtors to the value of $50,000 and $20,000 of that is over 90 days old? People owe you money and won’t return your calls. What can you do?

Does that sound like your dilemma? If not personally you can sympathise with these business owners finding themselves in this situation. So then what can a business owner do to;

  1. Get out of this predicament and
  1. Minimise the risk of ever finding themselves in this situation again

In the first instance I recommend you find out exactly what attempts have been made to collect the outstanding funds.

Yes phone calls have been made, unsuccessfully. Have there been invoices resent via email? If so, how many? Is the client actually aware of the debtors trading terms? Could it be they pay on invoice 30 days after the end of the month of the invoice date? All this information needs to be investigated.

I have known businesses that only paid invoices once they got the phone call. I certainly do not condone this practice, as this is bad business practice for many reasons.

Assess

So firstly you need to assess each debtor individually as to why they haven’t paid the outstanding invoices and then create a plan on how to receive payments promptly.

Plan

Debtors 90 days + over

  1. Confirm you have the correct contact email address and then email the invoice and state in the email you will follow up with a phone call in two days time to confirm receipt of invoice and estimated date of payment. If this is already the second reminder letter to the client, I would also include in the email that if payment isn’t made by a date 14 days into the future from date of email, then legal action will be taken.
  1. Make the follow up phone call two days later and speak to the relevant person to discuss when the payment will be made. Reiterate your intention to take legal action if payment is not made by the agreed date in 14 days.

Note: I have had much success in the past with issuing Letters of Demand [1] and Statements of Claim [2] in the local court with willful non-payment of debts after sending two reminder letters and exhausting all avenues to get payment.

I know some businesses use collection agencies to chase up debtors but often times it will be at a cost of up to 40% of the money collected which doesn’t help your cash flow issues.

Debtors 30 – 60 days + over

  1. Assess each debtor individually and make sure you are aware of their trading terms. While you may work on 14 day terms, it won’t make any difference to the client if their terms are longer.
  2. You need to be diligent in sending out reminder notices with copies of the invoices.
  3. Records need to be kept of action taken to chase up your debtors so you have a history of emails sent or phone calls made.

MINIMISE THE RISK OF LONG STANDING DEBTORS 

Whether you are doing your bookkeeping yourself or you have a bookkeeper managing your accounts, there are great tools available now to help minimise the risk your business faces when cashflow is trickling.

There are many benefits of cloud accounting when it comes to cashflow management, to just name a few:

  1. Invoices can be set up and sent out with a pay now online This makes payment of invoices much easier for clients to pay very quickly.
  2. Multiple payment options. Gone are the days when a cheque run once a month was the only option for getting paid. Make it as easy as possible for your clients to pay your invoices quickly by giving them options. Investigate thoroughly the options available, read forums to see how other users have found the service available.
  3. There are apps available that will automate the process of chasing up debtors. EzyCollect and Debtor Daddy are two such apps that will send out automated emails, sms’ and reminders of phone calls. They interface with your software so all the information of your outstanding invoices is there. Either you or your bookkeeper can take advantage of these apps to keep on top of your debtors and increase cashflow.

I am a firm believer that the success of any business is the systems you have in place (after the product or service on offer). I have worked with doctors who had hundreds of thousands of dollars outstanding due to non payment of accounts after surgery and have been able to recover their payments for them.

If you would like some assistance to manage your debtors or setup systems to minimise the risk of cashflow issues, I would be more than happy to discuss them with you. Give me a call on 0402 819 611 or email me at lynne@uneedmeaccounting.com.au

[1] Letter of Demand Template

[2] Statement of Claim Template