October 7, 2025
Every Ugandan business that extends credit — whether a SACCO, microfinance institution, bank, or SME — faces the challenge of late or non-payment. Debt collection is not just about chasing overdue payments; it’s about safeguarding business cash flow while protecting client relationships.
Unfortunately, many businesses make costly mistakes during the recovery process. Instead of improving repayment, these mistakes worsen the situation: debtors become more resistant, reputational risks arise, and legal complications increase.
At Boresha Credit Services, we’ve seen businesses lose millions of shillings because of avoidable mistakes. Through years of experience in the Ugandan market, we’ve identified the five most common debt collection mistakes businesses should avoid, and we’ll show you how to fix them with practical strategies.
Mistake 1: Delaying Debt Collection Efforts
Why This Happens
Many businesses in Uganda wait too long before taking action on overdue debts. Owners often hope customers will “come around” and pay without intervention. Others fear that early reminders may damage relationships.
Risks of Delay
- Lower Recovery Rates: Studies show that after 90 days, the chances of collecting overdue debt drop by more than 50%.
- Cash Flow Problems: Late payments choke businesses, especially SMEs that depend on working capital for survival.
- Debtor Disappearance: In Uganda’s largely informal economy, debtors can become untraceable if too much time passes.
Example (Ugandan Context)
A Kampala-based electronics supplier delayed following up with clients for three months. By the time they engaged Boresha, half of the debtors had shut down their shops, making recovery extremely difficult.
Solution
- Implement a structured debt collection policy with clear timelines.
- Send reminders immediately after due dates — SMS, calls, and emails.
- Escalate persistent cases quickly to professional agencies.
- Train staff to balance firmness with professionalism in early interventions.
Mistake 2: Poor Documentation and Record Keeping
Why Documentation Matters
Ugandan SMEs and SACCOs often run on trust and informal agreements. While this works short-term, it creates serious problems when debtors fail to pay. Without proper documentation, it becomes nearly impossible to prove a debt legally.
Consequences of Weak Records
- Inability to prove debt in court.
- Miscommunication with debtors (“I already paid,” “That wasn’t the agreed amount”).
- Lower credibility in negotiations.
Example
A SACCO in Gulu provided loans based on verbal agreements. When multiple borrowers defaulted, they had no signed documents to support legal claims, making recovery nearly impossible.
Solution
- Use written contracts for every loan or credit arrangement.
- Store copies of invoices, receipts, and signed agreements.
- Keep digital backups using simple tools like QuickBooks or Odoo.
- Record all communication (calls, SMS, WhatsApp) with debtors for evidence.
Boresha integrates strict documentation checks into every recovery case to protect clients legally and financially.
Mistake 3: Using Aggressive or Unprofessional Methods
The Problem
Some businesses in Uganda resort to harsh tactics like threats, intimidation, or public shaming. While these may pressure debtors temporarily, they cause long-term damage.
Negative Outcomes
- Damaged Reputation: Customers spread negative stories, hurting future business.
- Legal Consequences: Harassment can lead to lawsuits or intervention from authorities.
- Loss of Good Customers: Some debtors default due to temporary struggles, not bad faith. Aggression drives them away permanently.
Example
A retail business in Mbale publicly embarrassed a customer who owed money by posting their name on social media. The backlash destroyed trust and drove away other clients.
Solution
- Adopt a professional, respectful tone in all communication.
- Train staff in empathetic debt collection (understanding customer struggles while insisting on payment).
- Outsource to professional agencies like Boresha that follow ethical and legal standards.
Mistake 4: Treating All Debtors the Same
Why It’s a Mistake
Not all debtors default for the same reasons. Some are facing genuine hardship (job loss, medical bills), while others deliberately avoid payment. Applying a one-size-fits-all strategy leads to wasted effort and poor recovery outcomes.
Example
A bank in Uganda applied uniform collection methods to all borrowers. Those willing to pay but struggling financially felt harassed, while deliberate defaulters continued to stall. Recovery rates dropped significantly.
Smarter Approach
- Segment Debtors: Categorize them by repayment behavior, willingness to cooperate, and financial situation.
- Use tele-collection for cooperative debtors, field visits for harder cases, and legal action for chronic defaulters.
- Offer structured repayment plans for struggling but honest borrowers.
Benefits
- Higher recovery rates.
- Preservation of valuable customer relationships.
- Better use of time and resources.
Mistake 5: Not Seeking Professional Help
Why Businesses Avoid Outsourcing
- Fear of costs.
- Overconfidence in internal staff.
- Lack of awareness of debt collection agencies.
The Risks
- Businesses spend valuable time chasing debt instead of focusing on growth.
- Internal staff may lack negotiation and legal expertise.
- Mistakes lead to reputational and financial losses.
Example
An SME in Jinja spent six months chasing a large overdue debt internally. By the time they brought in Boresha, the debtor had already shifted operations, making recovery difficult.
Why Outsourcing Works
- Professional agencies like Boresha Credit Services have systems, trained staff, and legal knowledge.
- Agencies operate on performance-based fees, meaning businesses only pay when recovery succeeds.
- Outsourcing protects brand reputation by ensuring ethical, professional engagement.
Beyond the 5 Mistakes: Hidden Pitfalls to Watch For
Apart from the top five, businesses also fall into other traps such as:
- Failing to communicate terms clearly at the start.
- Ignoring technology (like debtor tracking software and automated reminders).
- Mixing personal and professional approaches, leading to emotional rather than rational decision-making.
- Failing to train staff, which results in inconsistent communication with debtors.
Avoiding these smaller mistakes can also significantly boost recovery rates.
FAQs
Q1: What’s the biggest debt collection mistake SMEs in Uganda make?
Delaying action. The longer you wait, the harder it becomes to recover debt.
Q2: How can poor documentation affect debt recovery?
Without contracts and records, businesses cannot prove debts legally or negotiate effectively.
Q3: Why is professionalism important in debt collection?
Because aggressive or unethical practices damage reputation, invite legal risks, and push away potential repeat customers.
Q4: Should SMEs outsource debt collection?
Yes. Outsourcing ensures expertise, professionalism, and higher recovery rates while freeing up internal resources.
Q5: What’s the best way to handle different types of debtors?
Segment them by willingness and ability to pay, then apply tailored strategies like reminders, payment plans, field visits, or legal escalation.
