One of the big mistakes many businesses make when collecting business debts is not having a clear policy and timetable for dealing with debtors.

Too often a debt can sit on the company books for weeks , even months after it became due because of lack of diligence on the part of the business owner.

Large companies rarely suffer from this kind of mismanagement. If you have ever been on the receiving end of the large company process, you will know how the demands escalate to a serous level in a relatively short time.

Ok, your company may not be in the multi-million conglomerate bracket but relatively speaking bad debt is a big problem and can kill the best companies if it isn't addressed in a timely manner.

Large companies have a set procedure which usually starts with a statement. You should do the same. Always send statements to your customers at the same time each month, usually around the beginning/end of the month.

If a bill is due within that time frame or overdue amounts appear on the statement, make a hand written comment on the statement. This lets your debtor know you are watching the account and are aware of the arrears.

One week later no more , no less, send a letter to the debtor, informing them their account is in arrears. The letter can be standard but try tp personlize it by using a time reference within the body of the letter. First time round this will usually get a satisfactory result, otherwise a second letter should follow. Now the thing to remember here is that if you have a debtor who is regularly late paying bills then they will know what to expect. In fact they will use your system to buy themselves more time to pay. It's like they know you will send three warning letters before you actually phone them and then they know how much longer after that call they have before you call again.

These kind of debtors are playing you and using your system against you - time to mix things up.

If you have a bad payer - earmark them for random treatment.

Try calling them before the debt is due. Quite often a company or individual will say they didn't receive the original invoice and will think they can buy extra time by assuming your payment terms begin on receipt of your invoice.

A quick call to confirm receipt or to confirm payment is scheduled within their system, will avoid that excuse.

Normally, you will have a series of letters which will successively increase in severity.

Try skipping letters 2 through to 4 and go straight to the telephone call. Then skip the second call and go to the debt collection letter. Incidentally this doesn't have to be a real debt collection agency. Many companies use a fictitious debt collection service name which purposely doesn't include a telephone number but instead might just have a mailbox address. This can have quite an effect on bad payers as they are sometimes stunned at the speed you seem to have escalated the demand. You may even get an indignant call from them asking you to explain why you are using such drastic measures.

If that happens - don't apologise. Simply tell them you are being pressured. But, if they can pay within an acceptable time frame you can call off the debt collection services, for a short while at least.

You must also limit further damage by withdrawing future dealings until the debt is paid. You should inform the debtor in writing that you regretfully cannot provide services/goods while a debt remains unpaid.

Finally, once you have been received the funds. Consider very carefully before extending credit to the individual or company again. There are many old sayings warning of not making the same mistake twice and they will rarely apply more than when doing business with a bad payer.