Tuesday, 14 August 2012 16:30

Naming and shaming as a debt collection tool

Late payments are a burden that all businesses must bear, and we fully understand and appreciate the annoyance that they can cause to all of our clients, whether big or small. So when a customer leaves you with an unpaid invoice, it's equally understandable that you might choose to 'encourage' them to pay up in any way possible.

Increasingly, that for some people means taking to the social networks to name and shame the non-paying client and try to embarrass them into paying. There are clear problems with this approach - for a start, you have to wonder whether a business owner happy to renege on a contract is likely to be shamed into settling their account simply because of a bit of bad word of mouth. But we were curious to find out just how often naming and shaming actually works - so we asked you.

The Name, Shame and Blame Game

We asked 24 of our clients to tell us how they handle late payments - and specifically, whether they had ever tried naming and shaming.

Of the 24, 15 had never tried naming and shaming, preferring to use other forms of credit control to make sure their invoices got paid on time.

That left nine who had tried it, of which six - two thirds of the total - claimed that it simply had not worked as a way of speeding up their customers' payments. It's a modestly sized sample, but it reflects what we've always suspected - that naming and shaming is just no good as a way of chasing late payments.

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Unnecessary Complications

Naming and shaming can often feel like the right thing to do as a form of retaliation for clients who don't pay their invoices on time.

However, it's often wiser to keep the problem private and chase payment behind the scenes; make it public, and you could be accused of damaging the client's reputation.This in turn can lead to them bringing legal proceedings against you, or at the very least can delay their payment even further - the exact opposite of the effect you were hoping for.

With formal but polite credit control processes in place, you can make sure that the client received your invoice and is processing it as planned, allowing you to double-check on when the payment is due to be made.

If this is likely to be soon after the deadline, you may want to take no action; however, if the client is delaying payment unreasonably, you can take steps to recover the debt.

Sid Home MD at Safe Collections states:

“We have seen a small number of freelancers name and shame debtors using social media and it has yet to prove successful. In actual fact whilst it may feel good to publicly “out” the client in question it will have a negative impact on recovery and is often used as yet another excuse to withhold payment.”

It's a topic that's bound to come up again in future as social networks continue to develop and redefine 'word of mouth' for the 21st century, but for now it definitely seems as though naming and shaming is a bad idea.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image "Facepalm" by flickr user Predrag Stojadinovic is licensed under CC BY 2.0

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