I was reading this blog posting the other day, this is a great topic about dealing with non-paying customers and something that I would like to present on at the Business User Group soon.

Unfortunately the world has some dishonest people in it and Australian laws allow protection for these people which makes it very frustrating to deal with at times. One of the common mistakes you can make is trust people with no backup plan.

My advice is when somebody owes you money and they say yes yes I will pay just need to clear some money which will happen next week. Do some simple steps:

1. Get them to confirm in writing that they agree with the debt and the terms that they wish to pay on like ie all of it next week etc. This stops people buying sometime getting you to finish some work then create a fuss about the account not being correct. When you go to arbitration you can also use this as proof they agreed to the debt and you have attempted reconcilation.

2. Keep the debt collection process on track, simply explain to your customer when they say they will pay next week say to them thats great, explain that the debt has been marked as a bad debt and will be given to an agency automatically next week if they dont pay so its important that this is honoured. If they complain ask them “But you are going to pay so there should not be a problem”.

One of the tactics used by bad people is delaying of debts, they will hang out to the very last moment. Make sure you make that last moment as soon as possible.

3. Add debt collection into your invoices, give people who do pay on time a 10% discount and that extra money will cover the cost of debt collection. Its suprising how often people will pay on time when there is a discount on offer. You can either factor this into your estimate or when you factor in the cost of cash flow and your time chasing debts its not a bad option to discount either.

The big advice here is keep on top of your debtors, make sure you make contact with them the day debts become due. Them knowing your proactive makes them proactive.