Collecting outstanding payments can be a persistent challenge for businesses. Despite implementing various systems and procedures, some clients inevitably pay late, placing businesses in the uncomfortable position of having to pursue them for owed funds. Many business owners find this aspect of running a business difficult to manage. These conversations can be awkward and carry the risk of damaging client relationships, especially with habitually late payers or when substantial sums are involved. Is it better to simply forgo chasing the debt altogether?

The Impact of Pursuing Outstanding Payments

One primary benefit of pursuing a debt is the increased likelihood of receiving payment. This action signals to the client that payment is overdue and requires their attention. If direct communication feels uncomfortable, consider engaging a debt collection agency. These agencies specialise in recovering outstanding payments, allowing business owners to focus on their core operations while preserving professional relationships.

The Risks of Not Pursuing Outstanding Payments

Conversely, choosing not to pursue outstanding payments can have significant repercussions. The most obvious is the potential loss of revenue for completed work or delivered goods. This directly impacts cash flow and can lead to financial strain. Furthermore, a lax approach to debt collection can negatively affect a business’s reputation. While maintaining positive client relationships is important, so is demonstrating professionalism and financial responsibility. If it becomes known that a business is lenient with overdue payments, it could attract fewer desirable clients or even encourage opportunistic behaviour from others. Therefore, failing to pursue debts poses a greater risk than actively seeking payment.

Effective Strategies for Collecting Outstanding Payments

• Directly Request Payment: Often, late payments are unintentional, resulting from administrative oversights, banking issues, or misplaced invoices. A polite reminder shortly before the due date can be a helpful preventative measure. If payment remains outstanding, initiate the collection process.
• Automate Payment Reminders: Automated reminders offer a less personal approach to debt collection. Many accounting software solutions provide this feature, sending automated notifications about upcoming and overdue invoices. This protects both the business owner and the client from potentially awkward conversations and ensures timely follow-up.
• Reference Agreed-Upon Terms: Clearly referencing the original contract terms and conditions, including payment schedules, reinforces the client’s contractual obligation to pay. This can be particularly effective when addressing disputed invoices or payment delays.
• Strategic Timing: Understanding a client’s payment cycles can improve the effectiveness of collection efforts. Many businesses process payments weekly. Identifying these payment runs and sending reminders shortly beforehand can increase the chances of prompt payment.
• Provide Necessary Information: When requesting payment, ensure the client has all the necessary information to facilitate payment. Include the overdue invoice, payment methods, and any relevant links to online payment portals. Simplifying the payment process can encourage prompt action.

Scott & Mears Credit Services can help. Our experienced team handles all aspects of debt recovery, from initial payment chasing to any necessary legal action. Contact us today to learn more about how we can assist your company in recovering money that is owed to you.

Disclaimer: The information provided in this article represents the opinions and insights of Scott & Mears. It is intended for informational purposes only and should not be considered as professional financial or legal advice. Business owners and individuals seeking financial guidance should consult with qualified professionals to address their specific financial needs and circumstances. Scott & Mears disclaims any liability for decisions made based on the content of this article.

Published: 24/02/25