Question:
What do you do when a client just won’t pay?
Gavin Long, specialist products manager at KreditInform offers some guidelines:
Answer:
Collecting payments is a tricky business: you may have to take a hard line with bad payers, but you don’t want to alienate clients and jeopardise future relationships.
Start by running a credit check on potential customers before you sign with them. Retailers do it to individuals all the time before they grant credit – and rightly so. Small businesses should take the same precautions
Once you know your customer is a good bet, put in place an agreement upfront, before you do business. The agreement must state:
- When payment is due
- How payment will be made (by cheque, or Internet transfer, for example)
- What will happen if payment is not made timeously (this may include your right to cease work for them, or to repossess what you’ve sold to them)
- That interest that will accrue and be charged on any overdue payment.
But what if they ignore this?
- Stop working for them. Anyone who does not pay you is not a customer, and small debts become big ones as businesses keep working in the vain hope that the situation will turn around.
- Call your debtor frequently and persistently until they respond.
- If they don’t, instruct your attorney to issue a summons against them. They will receive an Order from the Court to pay the debt. The SA legal system does not require that a summons be received in person.
- Be prepared to sue, even if it’s in a small claims court. There is no guarantee you will win, but it’s amazing how quickly attitudes change when court papers are actually served.
- The summons informs the individual of the court appearance date and allows them to represent themselves. If they fail to appear in court, the judgment is issued in default. This is then held on credit bureau systems for five years.
By Gavin Long, specialist products manager, KreditInform
Tel: +27 11 777 2700; or visit www.kredit.co.za
