Gravity Debtors Management Masterclass – Lesson 2

Schedules that pay

Key point covered in this lesson:
• Keep tabs on what you invoice, and when they are due
• Create a follow-up timeline
• Update paid accounts
• When to escalate
• Managing relationships 


Keep tabs on what you invoice, and when they are due

Whether you use an old school diary, or a state of the art digital invoicing software package, your system needs to be set up in such a way that you immediately know when an invoice becomes overdue. The sooner you are able to react the better your chances of recovering the debt. 

In many instances when customers don’t pay, and get the impression that you did not realise that, or do not plan to act on it, they are more inclined to not pay at all. If however you supplied the invoice timeously, and follow up the moment it becomes overdue, they perceive that you are well organised and will most likely pursue the payment. This will entice them to rather pay than leave it. 

The process of invoicing has a lot to do with clear and accurate communication. Once the communication is not clear, or halts, payment follows suit. 

Technology has made this task a lot easier and there is no shortage of options that can assist you in keeping tabs on your invoices. Below is a list of reputable options that have proven themselves worthy in the New Zealand business market:

These options below include full accounting packages and other invoice only management packages that will integrate with your accounting system.

MYOB /MYOB Business Tradifyhq
Xero Odoo
QuickBooks Stripe
Reckon GoCardless
Oracle Fusion Cloud
Sage Intacct
SAP Concur

Create a follow-up timeline

It is very important to come up with a standard follow-up process that gets followed diligently with every invoice. Once your clients come to know that when they don’t pay on time you will follow up shortly, they will try and avoid that. This is exactly what you want.  

The best time to follow up an overdue account is a day after it becomes overdue. This way you can ensure that they did not perhaps pay on the last day and their payment has not yet reflected in your account. 

A proven method of follow up is with a standardised set of follow up letters. Assuming your payment terms are 30 days, this set could contain one initial reminder letter issued on day 31, a letter issued on 60 days and a final one issued on 90 days. 

The first letter is nothing more than a friendly reminder in case it has just slipped the mind of the customer to pay. It should contain all the relevant information pertaining to the work done, the amount owed, and all other relevant information that is required in an invoice. Although the tone of the letter is friendly and polite, it may make mention of late payment fees that could be avoided by paying promptly. 

It could also include payment arrangement details if you are willing to enter into such an arrangement or have reason to believe this might be a viable option for your customer. 

Your approach following this letter will be determined by the actions of the customer. If you are greeted with nothing but silence, you might want to try other modes of contacting the client in case they are not receiving the invoices. Once you have established contact it is easier to negotiate some sort of payment arrangement or get a commitment from the customer. 

The letters at 60 and 90 days are somewhat more formal and need to inform the customer of any late payment fees and penalties that have been added to their invoice. An updated invoice needs to be supplied. keep in mind that although it is perfectly legal to charge late payment penalties, these need to be mentioned in the initial payment agreement and invoice. 

Once you have sent all the letters, added late payment fees, and tried and failed to contact or negotiate with the customer, it might be time to look at other options. But more about this in the section on When to Escalate


Update paid accounts

Although this seems quite obvious, it happens very often that businesses send invoices and reminders for accounts that have already been paid. Not only can this be frustrating for customers, it also does not inspire much trust in your administration system and ability to manage your business. 

It is therefore vital to consolidate your accounts and banking statements on a daily basis. Although this can be laboursome, especially for smaller businesses, it is well worth having a good system and creates trust with customers. 


When to escalate

So you’ve sent all your payment reminder letters, taken steps to establish communication and agree on an arrangement, but alas, the account remains unpaid. What now? 

The steps you can take depend largely on the situation. It is however important to note that before you pursue these steps, you need to try and establish communication to determine why the debt is unpaid. Often businesses send letters, mails and even threats, without ever trying to engage the customer directly to determine what the cause of non-payment is. 

If there is a dispute

Often customers refuse payment if they dispute some or other aspect of the work or invoice. Such instances can largely be avoided by clear communication and good record keeping in the negotiation phases before work commences. There are however cases where everything is properly agreed on, and documented, yet the client disputes the invoice or scope of work. 

In such cases it is advisable to employ the services of a third party to make a decision as to what is fair and right. This can either be done by the disputes tribunal.

When the debt is not disputed, but the client is still refusing to pay, you may have to go to court. This can however be a lengthy and expensive process so would not be feasible for smaller debts. 

Alternatively, you could appoint the services of a third party debt collection company. Although there are many myths and beliefs about debt collection companies, the truth is they often have a lot of resources and expertise that most businesses don’t possess. If your payment terms and invoices are properly set up, they are able to incur their fees directly from the overdue client, at no cost to you.


Managing relationships 

While we are on the topic of debt collection agencies, there is a lot to be said for the value of managing relationships with clients by using their services. Gone are the days where collection companies engage in intimidating strategies. These days it is quite common for large corporations to outsource their collections to reputable companies like Gravity Credit Management, to assist in maintaining good relationships with customers, even when they fail to pay. 

Gravity has a dedicated team of collection agents that specialise in establishing communication, and setting up amicable payment arrangements with customers. This all happens without you having to enter into emotionally loaded situations with the client, potentially ending the working relationship for good. 


Some useful reading






Lesson: < 1 2 3 4 5 >

Privacy Settings
We use cookies to enhance your experience while using our website. If you are using our Services via a browser you can restrict, block or remove cookies through your web browser settings. We also use content and scripts from third parties that may use tracking technologies. You can selectively provide your consent below to allow such third party embeds. For complete information about the cookies we use, data we collect and how we process them, please check our Privacy Policy
Consent to display content from - Youtube
Consent to display content from - Vimeo
Google Maps
Consent to display content from - Google
Consent to display content from - Spotify
Sound Cloud
Consent to display content from - Sound