Collecting outstanding accounts should form part of a businesses credit control cycle.

It is not just simply a matter of instructing third parties such as collection agencies and solicitors to undertake this task for you. Careful consideration has to be given as to how the entire collection process dovetails with your organisation's credit policy. So collection of outstanding accounts has to be planned to ensure certain types of action take place at prescribed times - usually within a monthly cycle - or sooner depending on the gravity of the situation.

The collection process can take the following route:-

  • Invoice: This should be accurate detailing your customer's name and address, delivery details, order number (if applicable), details of the goods delivered and price against each item; any vat due, if applicable.
  • Statement of Account This is an amalgamated summary detailing sums due by your customer at the month end taking account of all transactions which have taken place during that month.
  • First Reminder Letter This should be a polite but firm reminder requiring your customer's payment within a prescribed period - usually seven days - but shorter if required. Sample First Reminder Letter
  • First Telephone Call This should follow on from the "First Reminder Letter" requesting payment within a defined period.

Before making a telephone call to your customer you should ensure you have all the necessary information in front of you. This should include copies of invoices, statements of account, credit notes, details of any disputes (resolved), details of the person you wish to speak to along with an appropriate contact telephone number. Armed with this information you should be able to answer any query which your customer may raise quickly and intelligently.

Experience has shown that a polite approach requesting your customer's help can often include elicit a positive response. The script for such a telephone call could be as follows:-

"Good morning Mr Jones. This is Mr X from the ABC Company Limited. Are you the person responsible for payment of accounts? (On the assumption you have reached the correct person the answer to this should be the affirmative) I need your help (Hopefully this should provoke a sympathetic response - most people do respond positively to this). Your account for (£_X__ amount dated W) is overdue.

When can I expect payment?"

At this stage you should ensure you receive a positive commitment from your customer to pay at a certain date. If you have received the commitment you are looking for there should be absolutely no problem whatsoever in making the next telephone call or reminder letter.

  • Consideration whether customer should be put on "stop"
  • Final telephone Call This is Mr X of ABC Company Limited. I refer to our telephone conversation of ______. You said that I would be able to receive payment by (state the date). I have not received this. I really must insist that I receive payment by (state the date you require payment by).

Once again this puts you in control of the position. You will have established there is absolutely no problem with the account and that payment should have been made by a certain date and that you require payment by another date, following a broken promise. Most organisations will respond positively to these requests. If your customer still refrains from making payment it is open to you to send the final reminder letter which could ultimately lead to the matter being referred to a third party for collection should payment not be received satisfactorily.

  • Final Reminder Letter This should make reference to previous communications requiring settlement by a definite date. Sample Second Reminder Letter and Sample Final Reminder Letter
  • Consideration of whether to pass account to collection agency or to solicitors for legal action.
    If, despite all efforts the collection process has not produced the desired cash receipt from your customer consideration should be given whether instructions should be given to a third party for this purpose.