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Debt collection

Learn how to manage credit and debt effectively with this free sample chapter from the FPB's Credit Control Guide.

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This content is taken from our online Credit Control Guide, available as part of Intermediate and Advanced Forum membership. Debt collection should follow a defined timetable or programme and you should ensure that all relevant staff are fully informed. Keep records of action taken regarding each debtor. Some computer software packages allow for details to be entered of action taken. Although policies on debt will vary from firm to firm, you could use the following timetable as a model. a) Statement – send as soon as possible after end of stated payment period This simply states the amount of money due and the date due. As with all correspondence sent to debtors, you should send statements to a named person or to a job title, such as credit controller, finance director or managing director. It is also advisable to re-state the terms and conditions as they appeared in the original order acknowledgement and invoice. b) First written reminder – send seven days after sending statement In the first reminder you should politely draw attention to the fact that the invoice remains outstanding and enquire whether there is a particular reason for the delay. Reminder letters should not appear to be standardised documents; more notice will be taken of them if they are personalised. They should be concise and clear. For an example of a first reminder letter, click here. c) Telephone call - make four to five days after sending the reminder letter Bear in mind the following points when telephoning to recover debts: Speak to the person who has responsibility for clearing invoices (purchase ledger clerk or buyer in a large firm or the finance director in a small business). Always be polite and calm. Have all relevant facts at your fingertips – dates of previous contact, dates and amounts of previous payments received, invoice numbers and so on. Ask if the customer has any queries and, if so, listen to them carefully. Decide beforehand the policy regarding payment by instalments if the customer offers to pay in this way and the procedure to record any agreement to pay by instalments in writing. At the end of the telephone call, try to ensure that an agreement has been reached. Confirm the agreement in writing to avoid misunderstanding. d) Letter of final demand - send seven days after first reminder letter if telephone calls are unsuccessful. In the letter of demand you should advise the customer of the action that you are going to take – for example, ceasing to supply goods on credit until the invoice is paid or issuing court proceedings or a statutory demand. Sending this letter by recorded delivery will help ensure you are certain it has been received and can find out later who signed for it if necessary. An example of a letter of final demand can be downloaded here. | External assistance for debt collection >>

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