Thursday, March 28, 2024

Four Decent Steps To Follow When Trying To Collect Money From A Debtor

By Bizna Brand Analyst

We call them madeni. We lend people money all the time. Be it our friends, colleagues or relatives.  Sometimes it’s even people we don’t know so well. But most of the time, borrowers either delay payments or refuse to pay altogether. Certainly, there are formal steps you can take to collect money that people owe you – like hiring a debt collector or going to court – but sometimes it is often not worth the expense and effort. If all it takes is a few calls or persistence, it can make sense for you to go after even relatively small debts yourself.

Here are the basic steps to collecting what’s owed to you, whether it’s a business or a personal debt:

1.Determine when you’ll start ‘chasing’ the debtor

You did someone a favor by lending them when they were in need but they are taking forever to give you back what’s rightfully yours. Initially, you wouln’t want to bring down the hammer on a friend who borrowed 2000 shillings just because they didn’t pay you back within two weeks, or on a good customer just because they are a little late with a payment. As soon as you start going after your money, your relationship is going to turn into an adversarial one. So, chances are, you’re going to lose that friend or customer.

Eventually, the kind of relationship you had won’t matter. At some point, even in cases like those, you’re going to have to try to collect. The question is when? After 30 days? Two months? 90 days? Every situation is different, so you’ll have to decide what makes sense and how much time you can give them. If you are struggling financially, you can contact them immediately. If not, wait a few days.

2.Contact the debtor with a gentle reminder.

Assuming that people forget or like to be pushed a bit, your first contact with the debtor should be in the form of a gentle reminder, either by text, personally or on a phone call. Say that you’re just making them aware that the debt hasn’t been paid and you need the money. This approach allows them to save face by claiming that they “had forgotten” or they “still hadn’t gotten the money” and promise to pay you soon. And, in fact, a certain percentage of debtors will pay up as soon as they realize that you don’t intend to let the debt just go with the wind.

3.If the gentle reminder doesn’t work, the next step is to demand payment.

Fact is….the person who owes you shillings has broken their word. They’ve broken a boundary – not you. Don’t worry about being nice. Don’t worry about what they think or say about you. You are the good guy here. The facts are that you did someone a favor and they’ve taking advantage of you. Get a little angry and stay that way.

You’re no longer pretending that you think the debtor may just be confused. No need to be hostile, but make it clear that you are rightly owed the money and you expect either (1) to be paid immediately or (2) a definite commitment as to when payment will be rendered.

This will work with all but the most difficult debtors: those who honestly don’t have the money or those who just don’t feel like paying.

4.If that doesn’t work – or if the debtor doesn’t keep their promise to pay by a certain date – you have to take an even stronger approach.

If they just don’t feel like paying, they don’t respect your needs like you do theirs and you have no choice but to force them to. You’re probably going to have to take legal action. But if they are simply overextended and don’t have the money to pay all the funds they owe, you have to get yourself to the top of his list of priorities. How do you convince them to pay you before they pay someone else? By constantly contacting them – by phone, by letter, through e-mail, and maybe even by knocking on their door. Your persistence will pay off.

Collecting money isn’t fun, but you can be assertive without being threatening, and civil without being ineffective. It’s your money, so there is no reason to feel reluctant about using bold tactics to collect it. And not having to write off losses from bad debts can make a significant impact on your balance sheet.

 

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