Debt Collection Agency Urges More Proactive Approach to Late Payments

A commercial debt collection agency is urging small business leaders to take a more proactive approach to overdue invoices.

UK small and medium-sized enterprises (SMEs) are owed around £112 billion in late payments, according to research by the Centre for Economics and Business Research (CEBR). The average overdue amount per business is £42,000, the study found, a figure that closely matches the cash reserves of many SMEs.

Persistent late payments can choke off cash flow, block investment in staff or equipment and, in some cases, force companies to close.

Government consultations are under way, with Business Secretary Jonathan Reynolds exploring methods to help firms improve their cash flow by more effectively dealing with late payments. It would, he has said, be a big boost to the British economy.

Dean Kaplan, president of The Kaplan Group, a US-based commercial debt collection agency that has clients in the UK, says small firms around Wales should consider taking a more proactive approach to overdue invoices, and it doesn’t need to involve burning bridges.

“SMEs often avoid having difficult conversations because they fear losing the relationship. But we find that respectful and professional follow-ups often lead to better outcomes for both parties,” Dean said.

His firm specialises in B2B collections, and Dean noted that in many cases, clients welcome good communication because it reflects well on the creditor’s professionalism.

The first step in preventing late payments is tightening up front-end processes, he said. This includes issuing contracts with explicit payment terms, agreeing timelines in writing and invoicing promptly.

Dean advises SMEs to confirm that invoices have been received and understood, especially when dealing with new clients or large accounts departments.

“Simple steps like confirming the invoice format meets their needs or checking who signs off payments can prevent delays later on,” he said.

It’s important to act quickly when payment dates pass, said Dean. Rather than relying solely on automated reminders, business owners or finance managers should follow up with a polite but direct email or call.

According to Dean this human approach is often more effective.

“People pay people, not systems,” he said. “A short conversation can resolve what a dozen reminder emails might not.”

If repeated reminders and personal outreach don’t work, SMEs might consider involving a third party, but the tone of escalation matters.

The Kaplan Group often begins with a non-threatening contact, aiming to understand the issue rather than accuse the debtor. In cases where the client is genuinely struggling, flexible payment plans or phased settlements could preserve goodwill, it says.

“If you go straight to threats or legal letters, you’re likely to damage the relationship. But if you show you’re willing to listen and find a solution, that often leads to cooperation, and payment,” Dean said.

While many small firms hesitate to bring in debt recovery services, doing so can save time and signal seriousness, provided the agency understands the business’s need to preserve the client relationship, the firm said.

Dean recommends choosing a firm that prioritises relationship management and avoids heavy-handed tactics.

“In many cases, our involvement helps the debtor take the issue seriously without causing resentment,” he said. “We act as a buffer and a motivator, not an enforcer.”

The firm suggests the following steps for SMEs which are facing late payments:

• Review your payment terms and ensure they’re included in all contracts
• Invoice promptly and follow up with a confirmation of receipt
• Use polite and personal follow-ups as soon as payments become overdue
• Keep a record of all communication in case escalation is needed
• Consider phased payments or mediation if the client is struggling financially
• Choose collection partners carefully, prioritising those with experience in client-sensitive industries

“Most clients aren’t out to avoid paying,” said Dean. “They’re busy, disorganised or facing their own pressures. A thoughtful approach gets results, and can often strengthen the relationship in the long run.”