Working in Accounts Receivable for over 10 years, my current employer has annual sales of 480mm, one part of the job that is inevitable is experiencing customers that are unable to pay. The four steps that I take to retrieve money from a customer unable to pay are:
1. Be proactive and have a detailed process.
a. Even if you're a one-person company, there's no excuse for not having a clearly defined processes and policies for dealing with late payments. Chasing money is time-consuming; having a process in-place will help save time and profitability.

2. Contact the client immediately
a.) Communicate with the customer by calling the customer, making a face to face meeting or mailing a letter. Be polite and don't make unreasonable demands. In many cases, the client may simply have been away or has forgotten.

3. Nudge the client harder
a.) If the invoices remain unpaid, have a manager contact the person directly responsible for paying invoices. This is fairly easy for larger companies (simply call the reception and ask). It'll also give a chance to build a relationship with another person in the company. In some cases, the organization may simply have a payment schedule which is different to my company's.

It's a little more difficult for smaller or one-person companies, but keep persisting. They'll soon be dreading the embarrassment of your regular calls.

If payment is considerably delayed, write a formal letter stating a date when late fees and interest will start to accrue.

4. Accept the inevitable
a.) If negotiations break down, write a letter and send it certified mail stating that the client is in breach of contract and you have no choice but to withdraw your services.

By all means, state that you will be instigating legal action on a specific date and they will be responsible for all debt recovery costs. But don't make empty threats; be prepared to start legal proceedings on the understanding it may cost you more in time and money than the original payment, with no guarantee of success. This step should be done only if the amount owed is substantial.

As an accounts receivable specialist, you will come across situations where you need to get creative with clients, to collect payments. Some common steps are:

1. Communicate the aged invoice/invoices to your direct report
2. Follow up with the client by phone, regularly
3. Send reminder letters and emails
4. Escalate your calls to the department head
5. Legal action/outside collection firms are an option once all avenues have been exhausted

"My current employer has annual sales of 480M, and one part of the job that is inevitable is contacting customers who are unable to pay. The four steps that I take to retrieve money from a customer unable to pay are to be proactive, contact the client immediately and consistently, and be ready to accept the inevitable, which is usually going to collections. I am sure never to make empty threats and to remain professional at all times. The best case scenario is to agree on repayment terms, and to get those terms in writing."