Early signs of pending non-payment :-


  • No word from the debtor when payment falls due


Silence prevails.  This happens frequently.  You have supplied and delivered goods, provided services or rendered commercial performance to the benefit of the debtor.  Notwithstanding all of this you hear nothing when payment falls due.  An easy ploy to buy time.  The best approach in this scenario is to make immediate contact.  Don’t leave the situation unattended.  You need to find out why payment has not been made.  Go further and query whether there is any problem regarding payment.  Don’t be evasive on the issue.  Deal with it directly.  Best to do it this way for the benefit of your own cash flow management.


If the debtor tells you non-payment is an oversight or something to that effect, you must immediately put this in writing, usually by way of email, and send an appropriately worded letter back to the debtor copying in senior management.  That letter must record the telephone conversation you have had with the debtor.  Who you spoke to, what date and what time. Importantly you need to emphasise the debtor’s confirmation and acknowledgment that the debt is due.  Reaffirm that the debtor has no problem with payment and that payment will be forthcoming.  Always try and put a timeline in when you talk to the debtor.  If you have managed to do that include it in the letter.


If you simply leave the situation in the hope that the debtor will pay shortly, you do so at your peril.  Old debts are bad debts!


Furthermore, the quicker you deal with a “silence” situation, the better.  When you call the debtor you may be advised that there is a dispute.  If that is the case, best you know as soon as possible.  You might need to take action urgently if, for example, there is an opportunity for you to get your goods back or exercise some other form of security.  It is also preferable for you to hand a problem situation over to your attorneys as soon as you can.  If for example you need to apply to liquidate the debtor, the sooner that process commences the better your chances of recovery.


  • A query from your debtor on your accounting records


Calls for invoices and statements which you know the debtor already has is also common.  The debtor’s tactic is to try and shift the onus on to you.  Quite often this is done to try and secure a discount or a delay in the time for payment.  Once again utilise email communications to set up a paper trail.  Carefully record the debtor’s request and emphasize that you have complied with it, giving the debtor all he wants.  Then insist on payment within a specific time.


It is also important to distinguish between your customers.  There are always customers who are reliable payers.  Don’t waste time with them.  Their previous record of prompt payments will give you cause to rely on them for future payments on time.  Rather have your collection facility focus on those customers who are not paying.


Don’t fall into the trap of sending interminable accounting documents and information to the debtor.  A shrewd and evasive debtor can drag this out for months.  Accept that there is only so much you can provide.  Once you’ve done that, the lines are drawn.  You either get paid or you don’t.  If not, don’t waste further time, take action on the basis of what you have.


  • Discounts and repayment terms


Another common tactic is for debtors to request discounts or repayment terms or even both.  The problem here is that if you refuse this type of request, the debtor inevitably believes you are being unreasonable and obstructive.  It is almost as if you owe the debtor money and not the other way around!  Sometimes this goes further in that the debtor now feels justified in not paying at all until you have at least come to your senses and conceded a discount.


The best approach here is to turn things around.  Often it is pragmatic and effective for improved cash flow to concede a discount.  Make it a small one though.  When requesting discounts debtors seldom specify how much they expect.  Also make the discount subject to immediate payment. In this way you can turn the debtor’s request around to your advantage.


Something similar can be achieved regarding a request for repayment terms.  Again if you flatly refuse, the debtor often takes the position that he / she has tried to settle with you but you are being unreasonable hence no payment whatsoever.


Often better to accept payment terms provided they are not ridiculously low.  However use the opportunity to secure your position.  Get the payment terms reduced to writing in the form of a proper acknowledgment of debt.  That document must entitle you to go straight to court in the event of a breach.  You should also get the personal suretyship of a director of the debtor if at all possible.  It is more than reasonable to ask for this added security in light of the debtor wanting to pay you off in instalments.


Then of course you must include interest.  The debtor has the benefit of “your money” and you have every reason to get paid interest.




Perhaps the most important point is for you to appreciate that your collections people may well be stuck in a rut with how they handle collecting money for your company. Many of their practices may come from better economic times.  If that is the case, your cash flow is going to be negatively affected.  Your approach to collecting your outstanding debt needs to move with prevailing economic conditions.  The above are a few methods many of our clients have found successful.