When a client stops paying: an escalation ladder
The steps an advice practice takes, in order, when a client stops paying fees, from statements and calls to legal action and finally a write-off.
By Achekam · · 4 min read · For Financial services businesses in South Africa, Nigeria, Kenya
Advice practices are often reluctant debt collectors. The client is someone you have sat with across a kitchen table, discussing their retirement or their children's education. Phoning them about an unpaid fee feels awkward, so the invoice ages quietly while everyone hopes it will be paid. Sometimes it is. Often, by the time anyone acts, the client has moved on and the fee is lost.
What helps is deciding the steps in advance, so that chasing a fee becomes a routine the practice follows rather than a personal confrontation each time. This article sets out an escalation ladder drawn from ACCA and ICAEW guidance, shows which rungs Achekam handles and which stay with people, and ends where every ladder must: the decision to write the debt off.
The ladder at a glance
ACCA describes collection methods that range from monthly statements, chasing letters and phone calls and personal approaches, through stopping supplies, to legal action and external debt collection agencies. It notes that the last two are costly and likely to lose the customer. Read as a sequence, that gives a practice its rungs:
- Statements and automatic reminders.
- A personal call or e-mail from someone the client knows.
- A conversation about interest or pausing the service.
- A decision on whether formal action is worth it.
- Legal action or a collection agency.
- Write-off.
Each rung should have a person responsible and a point at which you move to the next.
Rungs one and two: statements, reminders and a personal call
The first rungs are routine and should run without anyone having to remember them. In Achekam, credit control is on for new workspaces. Once a day it e-mails overdue reminders and a monthly statement to customers with a balance, never charges anyone, and records whether each e-mail went out. By default, reminders go at 7, 14 and 30 days overdue with the invoice PDF attached. It needs the workspace's e-mail settings to be working, so check those once and then trust the record.
A customer statement of account can also be produced as a PDF at any time and e-mailed, and the screen says whether it was sent. That is useful before a call: send the statement first, so the client has the full picture in front of them when you ring.
ICAEW advises chasing debtors informally first, by calling or e-mailing to say that payment is overdue. In an advice practice, the call is best made by someone the client knows, often the adviser's assistant rather than the adviser, so the advice relationship is kept separate from the money conversation.
Rung three: interest or pausing the service
If the informal approach does not work, ICAEW suggests discussing steps such as charging interest or stopping supply, and reminding the customer that further action will be taken if required. For an advice practice, "stopping supply" usually means pausing work: no further reviews or new advice until the account is up to date.
ACCA adds a caveat that matters here. Stopping supplies is powerful only where the customer has no alternative supplier. A client who can find another adviser easily may simply leave, so use this step deliberately, and only where your engagement terms allow it.
Investopedia makes a related point about policy as a whole: a tougher collection policy might speed up collections, but it could also upset customers and push them to competitors. A practice that chases every invoice the day after it falls due may collect faster and lose clients it wanted to keep.
Rungs four and five: deciding on formal action
When informal chasing fails, ICAEW advises the business to decide whether it is ready to take action or needs advice, whether negotiating a solution would help, and how much time and money it is willing to spend to recover the debt. The ICAEW guide to chasing debtors sets out these choices in order and is worth reading before you instruct anyone.
A payment plan is often the most useful outcome at this point. If the client agrees to settle in instalments, record each payment against the invoices it covers; one client payment covering several invoices shows how to allocate one receipt across several invoices.
Lawyers and agencies
Legal action and collection agencies are the steps ACCA flags as costly and likely to lose the customer. By the time you reach them, the relationship is probably over anyway, but weigh the cost of recovery against the amount owed, and consider how a formal claim looks to other clients who know the person involved. Keep the full file of statements, reminders and call notes; whoever acts for you will need it.
The last rung: writing it off
Some debts will not be recovered. In Achekam, an unpaid debt can be written off once a partner approves, so the decision is never one person's alone. Separately, an administrator can void an issued invoice that has no payments or credits, which reverses its journal; that is for an invoice raised in error, not for a debt that has gone bad.
Writing a debt off in the books is an accounting decision; whether to keep pursuing the client is a separate one, and worth recording too. How other professional firms approach the same decision is covered in writing off legal fees a client will never pay, and a parallel approach to account statements in a medical practice is in statements and reminders for patient accounts.
Write your ladder down
Put the ladder on a single page: who does what at each rung, when the next rung starts, and who approves a write-off. Check that credit control is on and that the workspace's e-mail settings work. Then look at today's overdue list and place every client on a rung. Most will need nothing more than the reminders already going out; the few that need a call will be obvious.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
