Home' Australian Pharmacist : Australian Pharmacist June 2012 Contents Australian Pharmacist June 2012 I ©Pharmaceutical Society of Australia Ltd. 501
The golden rules for
collecting your overdue
By Roger Mendelson
Roger Mendelson is CEO
of Prushka Fast Debt
Recovery Pty Ltd, is
principal of Mendelsons
Lawyers and is the
author of two business
books, The Ten Mistakes
Businesses Make and
How to Avoid Them and
Business Survival, both
published by New Holland Publishers.
In the rst two articles of this series, we
looked at the basic building blocks of your
collection system, namely why you must
develop and use a New Customer Credit
Form and why you need well drafted
trading terms for your business.
By carefully carrying out these preliminary
steps, you can avoid o ering credit to
people who are a high credit risk in the rst
However, there will always be customers
who slip through the net. They may
well start out as a good payer but then
deteriorate over time, with their payments
becoming later and later, cheques bouncing
and excuses increasing. The information
from the form will considerably aid the
ultimate collection of those accounts and
proper trading terms will put you in the
position where if you have to sue, you have
a real advantage over your customer.
Your internal collection process will be
much more e ective if you follow the
following golden rules:
• Appoint one particular person to handle
the collection process and empower
him or her to handle the job, including
providing su cient time and resources.
• Set up a ow chart and ensure that it
gets followed. Each step should be at
a de ned interval and the steps must
always advance the claim forwards.
• Never send too many statements.
This merely indicates to your debtor that
you are not serious in your endeavors to
• The ow chart should provide for a
phone call to be made to the debtor at
an early stage in the process. The phone
caller would enquire: 'is there any reason
why this account is unpaid?' A rm date
for payment should be agreed to and the
means of payment should be con rmed.
• If there is an arrangement put in place,
then it should be con rmed in writing.
• The period from date of initial statement
until the nal demand should preferably
be no more than 60 days and de nitely
no more than 90 days.
• Seven days after the nal demand is
made, the account should be referred to
an external collection agency. You have
done all you can do internally and to
continue hoping that the account will
get paid just indicates weakness and
indecision to the debtor.
• Your trading terms should state that if the
account is referred to a collection agency,
the collection commission and any other
costs will become payable by the debtor.
In that event, if the agency is successful in
collecting the debt, it will also e ectively
be collecting the collection costs from
• There will be a small percentage of
accounts which may need to proceed to
legal action. In that event, your collection
agency or lawyer will need to determine
that there is an ultimate enforcement
path. For example if your debtor has a
permanent job or is a home owner, legal
option is de nitely commercially viable
because there will be an ultimate means
available to enforce the judgment.
• From the time that the account goes into
arrears, your ow chart should provide
that it be agged so that no more credit is
provided to the defaulting customer.
In summary, by following the simple advice
contained in the three articles, you should
gain the bene t of increased sales and
margins which will ow from providing
your customers with credit, while su ering
minimal collection costs and bad debt
losses as a result.
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