A Receivables Collection Process That Protects Relationships

Fix the front end: terms and invoices

Most collection problems are created before the invoice is sent. Agree payment terms in writing before work starts, and state them on the quote, the order confirmation and the invoice. Confirm who in the customer's company approves payments and what documents they need, such as a purchase order number or a delivery receipt.

Send invoices promptly, the day the work is delivered or the milestone is met, and check them for accuracy. An invoice with a wrong rate or a missing reference gives the customer a legitimate reason to delay.

• Payment terms agreed in writing and repeated on every document
• Name and contact of the person who approves payment
• Required references such as purchase order numbers
• Invoice sent the day of delivery and acknowledged

Know who owes what and how late

Keep one list of outstanding invoices with customer, amount, due date and days overdue. Group them: not yet due, up to a few weeks late, and long overdue. Review it every week, not once a month. The list is the basis for everything else.

Look also at patterns. A customer who always pays ten days late is a different case from one who has stopped responding. Treat them differently, and plan cash around the usual behaviour.

Set a reminder schedule and stick to it

Decide in advance what happens and when. For example: a friendly reminder a few days before the due date, a polite follow-up on the due date, a phone call a week later, and a more formal letter after that. The exact timing should fit your trade and customers.

Write short templates so that the tone is consistent. Keep the language factual and courteous: the invoice number, the amount, the due date, and a clear question, such as 'Can you confirm the date on which payment will be released?' A specific date from the customer is more useful than a vague promise.

Assign ownership

Someone must own the follow-up. For small teams, this is often the person who also raises invoices, with the owner stepping in for the largest or most sensitive accounts. Salespeople can help, because they know the customer, but make sure the person asking for money is not afraid of it.

Give them authority to offer simple solutions: a payment plan in writing for a genuine difficulty, or help in resolving a dispute quickly. Resolving disputes fast is one of the most effective collection tools.

Know when to escalate

Define in advance the point at which you pause new supply or change terms for a repeatedly late customer, and who decides. Apply the rule consistently so that it does not feel personal. For disputes or recovery steps that may involve legal action, take advice from a qualified legal professional.

Finally, review your worst accounts every quarter. Ask whether the relationship is worth the effort and cost. Sometimes the best collection step is deciding to sell less to a slow payer.