Collect Debt from a friend without the awkwardness!

One of the most common issues we come across is when a debt is owed to our customer by their friend. Below we outline the most common scenarios that occur and what you can do to collect debt from a friend without the “awkwardness”.

Let’s say your friend or business acquaintance decides to purchase one of your services or products. You agree a fee and you provide your service or product. However because you trusted them you didn’t follow your usual procedure in the same way you usually do when you obtain a new customer. Perhaps you didn’t tell them what your payment terms are? Or maybe you didn’t send an invoice like you normally would?

Your friend:

  • Delayed on making payment because he knows you and you didn’t inform him of your payment terms.
  • Runs into cash flow problems and thinks that you can wait for your money.
  • Cancelled your service and expected not to have to pay you (because he is your friend).

You Didn’t:

  • Obtain your friends business address, invoice address or any of the correct channels of communication.
  • Issue a contract or a “terms of business.”
  • credit check your friend or their business because you trusted it would be alright, “they will pay” you say!
  • Send your official terms of payment because it felt awkward. You didn’t want them to think that you “don’t trust them!”

What happens:

  • Your friend now owes you money.
  • Now you feel awkward asking for your payment because you don’t want to ruin your relationship with them.
  • You now have to collect debt from a friend!

You ask for the money:

  • They either apologise and make the payment (hopefully)
  • They don’t answer, they delay and the debt runs on…..

If you had gone through the same process that you usually do with new customers, you might not be in this position now.

If only you had their full address and company details. If only you had the correct channels to chase the payment effectively.

The moral of the story…. Even if you have provided a service or product to your friend, you must always obtain their full company details.

You must always issue them with the official terms of your service or product.

Even if they are a close acquaintance, you will always gain more respect by taking them through the formal debt recovery processes. They will tell their friends you are professional and be more likely to recommend you.

You don’t have to feel awkward about asking for all of their details and telling them what your company payment policies are. Blame “company rules” if you have to.

Following the above steps may save your friendship in the long term.

What can you do now though?

Try to contact your friend and resolve the dispute, speak to them openly and be willing to compromise. Should you friend not respond, perhaps they are not a friend and you should follow a formal debt recovery process by sending a Letter Before Action to recover the money they owe.

Another alternative could be Mediation, this is where a third party will mediate between you and your friend to achieve a desirable mutual ground for both of you.