How to Collect Debt Without Straining Your Relationships

How to Collect Debt Without Straining Your Relationships


Within the SME tangled web of suppliers and customers, there is a chance that some of the debtors will be family, friends or people who you have been working with for years.

Most relationships are built on trust and therefore, businesses might be inclined to allow a debtor extra time to pay up if needed. Unfortunately, as enough favours are given and as debtors get comfortable, late payments might become a habit.

While we’d like to think that we could trust the people with whom we have close relationships, the reality is that intentionally or not, their actions could be hurting your business. When payments become later and later, many business owners might feel stuck about what to do next. They don’t want to damage the relationship and it's easier to avoid conflict. As a result, they become passive and continue to let it go to the point where it can get serious.

What can you do differently to lessen the weight of this situation and prevent it from happening again?


1. Stop being flexible

Clearly state your payment terms from the start to your debtor and ensure that they understand what is expected. If payment terms need to be re-negotiated, ensure that it is done in writing and that the debtor agrees to the new terms and conditions.


2. Stay aware

If you are using a platform like CreditorWatch, you should be monitoring everyone who is connected to your business, including family, friends and businesses you have worked with for years. It’s easy to overlook them because of your relationship, but it is in your best interest to look out for yourself and your business. If you see red flags on credit and bankruptcy reports, then you should take it seriously.


3. Remain calm

Take a deep breath and don’t react immediately. While you might feel annoyed and frustrated, aggression is never the answer and it will only strain the relationship. Always remain respectful and polite no matter how serious the situation.


4. Make a plan

First, you should decide how to approach the debtor. Remain calm, let them know that you value their relationship, and take interest in their situation. Ask for an update and how they are doing. Once you understand what is going on with them, remind them of the debt and the deadline and explain why it is important for you to receive payments on time (ie. Keep the business running, pay staff, operational costs). They might not be aware of the impact of their actions. If needed, you might need to reasonably negotiate payment terms and options.


5. Use debt collection tools

CreditorWatch provides tools that can assist creditors with debt collection, such as the CreditorWatch membership logo and letter of demand templates. These tools are more effective than they seem and send a strong message to pay up.

While it is never a guarantee that the relationship will survive, the most important thing is to put yourself and your business first. This is why it is so important to take action, implement plans and preventative measures to protect yourself and your business. Stop the cycle of late payments before it starts.

This article first appeared on CreditorWatch's blog

Lindsay Simoncavage

Digital Content Manager at CreditorWatch