Having trouble getting paid?
‘Can’t pay’ v ‘Won’t pay’
When recovering debts, differentiate those who “can’t pay” from those who “won’t pay”.
A quick response is always important. A friendly visit often works – knowing that you have to see the creditor in the street is a good incentive to pay.
But is a “pay now” response best? You are not a bank but if the debtor goes bust the chances of being paid drop.
Consider some of the following
- Charge interest. Charge for recovery costs.
- Set up a payment plan. Set fixed dates for payment, give a reminder before the due date and follow up if payment is not received.
- Offer a discount for full payment now.
- Take extra security eg a guarantee.
- Agree to take goods or services in payment of your debt.
- If you are supplying credit, reduce or stop the limit and go to cash terms.
If your debtor pays you but then goes bust, there is a risk of a liquidator taking the money back. For larger debts, speak to your advisor early, as there are important steps to take to reduce the risk of “claw back”.