Most SMEs do not have a collections process. They have one uncomfortable person calling when it is already late — usually management, usually calling a client they have a personal relationship with, usually not quite sure what to say.
The discomfort does not come from collecting. It comes from collecting late, with no rule, case by case — because then every phone call is a fresh decision, and it feels like asking a favour. A written process solves both problems at once: it collects faster, and nobody has to decide anything.
Why does collecting feel so uncomfortable at a small company?
Because whoever collects is almost always whoever sold. At a company of ten to fifty people, the manager who signed the contract is the same person who has to ask about payment, and fears the conversation will taint the commercial relationship.
The practical effect is familiar: you wait. You wait a week, then two, and by the time you finally call, forty days have gone by — at which point the conversation really is uncomfortable, because the debt is now large and the earlier silence has made it strange. The discomfort you tried to avoid shows up bigger, and later.
The way out is to depersonalise it. When there is a contact schedule that applies to every client equally, the phone call stops being a judgement on that particular client and becomes a routine of the company. It is a difference of framing, and it completely changes the tone of the conversation.
The process, start to finish
| When | Action | Channel and tone |
|---|---|---|
| 3 days before due date | Automatic reminder with the invoice attached | Email, informative |
| On the due date | Due-date notice | Email, neutral |
| 7 days after | Second notice, with an open question | Email, friendly |
| 15 days after | Personal phone contact | Phone, conversation |
| 30 days after | Formal letter with interest and collection costs | Written, formal |
| 60 days after | Written decision: agreement, hold or escalate | Internal meeting |
The first four steps resolve the overwhelming majority of cases, and none of them is an aggressive collection tactic. They are information sent on time.
The messages that work
The reminder before the due date
This is the single most effective step, and the most ignored one. Three days before, a short email with the invoice attached and the due date. It is not a collection attempt: it is a service. Many delays are pure forgetfulness, or an invoice stuck in the wrong inbox, and this contact resolves them before they even become a problem.
The second notice, a question instead of a demand
A week after the due date, the email that works best does not ask for payment: it asks whether everything is in order with the invoice. It opens the door for the client to say what is actually going on — a missing purchase-order number, a value that does not match the quote, the person in charge being on holiday. You learn the real problem, and you solve the real problem.
The call at fifteen days
Short, factual, no apology, no beating around the bush. "I'm calling about March's invoice, due on the 15th. Can you tell me when it's going to be paid?" A concrete date is the only goal of the call. If a date is given, write it down and confirm it by email that same day.
The escalation, when it has to happen
From thirty days, it moves to written and formal, with the amount, late-payment interest and collection costs spelled out. It is not a threat — it is the application of a rule the company applies to everyone, and should be stated exactly that way.
What the law gives you, that almost nobody uses
Portuguese Decree-Law no. 62/2013, on late payment in commercial transactions, gives the creditor two rights most SMEs are unaware of:
- Statutory commercial interest on the amount owed, at a rate published every six months and considerably higher than the civil rate.
- A minimum compensation of €40 per overdue invoice, to cover collection costs, owed automatically and without needing to prove any loss.
You do not need to actually charge these amounts for them to be useful. Mentioning them in the thirty-day letter changes the nature of the conversation: it stops being a request and becomes a description of what the law provides. In practice, the invoice is often paid and the interest waived — which was the goal all along.
When to stop
A collections process also needs an ending. Chasing a debt indefinitely consumes time and energy that would pay off better elsewhere, and the cost of chasing it often exceeds the amount at stake. The decision to stop should be made in a meeting, with a date and a written criterion — the topic is covered in bad debt: when to accept the loss.
Check your own case
- There is a written contact schedule, the same for every client.
- There is a named person responsible for running it, and it is not management.
- A reminder goes out before the due date, not only after.
- The company knows today, without having to look, which invoices are more than thirty days overdue.
- There is a written criterion for suspending supply to a client in default.
Fewer than three "yes" answers means the company's collections depend on the emotional availability of whoever makes the call, not on a process.
Frequently asked questions
Doesn't collecting early make the company look desperate?
The opposite. Organised companies collect on time, with advance notice, and always the same way; it is disorganised companies that only show up when they are desperate, and that is what people notice. A reminder three days before the due date reads as administrative competence, not as a cash shortage.
Who should handle collections at a small company?
Someone who does not own the commercial relationship. Separating who sells from who collects protects the relationship, because it lets the salesperson stay in the role of the one who fixes things. Where there is no such person in-house, this is one of the functions that outsources most easily.
Should I suspend supply to a client that is overdue?
You should have a written criterion, defined before it happens, and apply it. Deciding case by case is what creates the difficult situations: the client who keeps being served with ninety days of debt is always the same one who later feels wronged when supply is finally suspended.
In summary
Collecting stops being uncomfortable once it stops being a decision. A written schedule, a reminder before the due date, a question instead of a demand, and a limit set in advance solve almost everything — and they improve the client relationship rather than damaging it, because they make the company predictable.