Options to Avoid Chasing Payments from Customers

Recently at my small business, we’ve been getting sick to the back teeth of chasing customers for money. Restauranteurs, our main trade customer base, are renowned for being terrible payers and trying to get them on the phone is fruitless - they’re either too busy, or closed. That means I dread credit-chasing day and most of time, just skip it - which is obviously not a sound way to run a business. I just can’t face this soul-destroying activity and basically, just don’t want it as part of my life.

So I’ve decided not to do it anymore. I figure our basic options are:

Pay someone else to do it for us - Given the tiny margins selling to the wholesale trade involved. I don’t see this is realistic. I gave Daniels Silverman (the ‘heavies’ we use for serious debt collection) a call and they offered to do it for 10%, then 7%. Totally unrealistic for us.
Factoring - Apparently, if you go down the route of factoring (where a bank or suchlike pays you most of a raised invoice straight away and then the rest, minus a commission, when the customer finally pays up), the bank takes care of the credit chasing. However, factoring for a small company like us also looks to be too expensive (around 7%) and I’ve heard they don’t do the credit chasing side of things well.
Stop offering credit - OK, this is the first realistic option. We could ask all customers to pay up front by credit card and simply not despatch orders without card details. However, lots of customers don’t have a business credit card and the chef ends up having to pay with his own card, which obviously isn’t ideal. Customers in this industry need to order quickly and often do so a few times a month, so it’s an imperfect solution. My sales guy thinks we’d lose about 20% of our customers if we insisted on this method.
Offer ‘Pay on Receipt’ terms - We could agree to despatch orders with payment but insist on a cheque or transfer immediately after the goods are received (i.e., put a nominal limit on it, like 7 days). I know from experience, though, that customers say they have posted a cheque and 60 days later it still, magically, hasn’t appeared. I don’t think this solution will lead to any efficiency savings for us.
Direct Debit - This is an intriguing option and not one that I have considered before. I guess you associate DD with giant mobile phone companies and think it will be out of your range. Not so. Direct debit can be used for ‘ad hoc’ payments (rather than monthly fixed payments) and there are companies that can help small businesses adopt DD as a collection method. At this point, DD looks like our best option.

Very shortly, I’ll post the results of my research into how viable accepting DD will be for us as a small business and whether we’re going to go down that path. If you already have some experience with this in the small business environment, I’d appreciate a heads up.