The Complete, Proven Guide to the Debt Collection Process in South Africa

The debt collection process in South Africa typically has 5 stages - Reminder, LoD, Pre-Legal, Legal, Listing.

If you're a business owner, credit manager, or CFO in South Africa and your debtors are not paying, you already know how much damage slow or missing payments can do to your cash flow.

The good news? The debt collection process in South Africa is a well-structured, legally governed system — and when you know how it works, you can use it to your advantage, protect your relationships with clients, and recover what you're owed faster.

Here's the short answer: the debt collection process in South Africa moves through five broad stages — internal reminder, formal letter of demand, pre-legal intervention, legal action, and credit bureau listing. Understanding each stage, and knowing when to escalate, is what separates businesses that recover their money from those that write it off.

The rest of this guide will walk you through every stage in plain language, with actionable tips at each step.

Table of Contents

Why Understanding the Debt Collection Process in South Africa MattersStage 1 — Internal Reminders and Credit ControlStage 2 — The Letter of DemandStage 3 — Pre-Legal Debt CollectionStage 4 — Legal Action and Court ProceedingsStage 5 — Credit Bureau Listings and Default NoticesThe Legal Framework You Need to KnowWhen to Hand Over to a Professional Debt CollectorWhat Our Team Has Learned After 26 Years in the FieldHow to Speed Up the Process and Protect Your Cash FlowFrequently Asked Questions

1. Why Understanding the Debt Collection Process in South Africa MattersSouth African SMEs are losing billions of rands every year to unpaid invoices. The latest data from the South African Reserve Bank shows that business credit impairments remain stubbornly high, and for SMEs in particular, one or two large unpaid accounts can be the difference between survival and closure.

The debt collection process in South Africa isn't just about chasing money — it's a structured, legally compliant system designed to protect both creditor and debtor. When you understand it properly, you can move faster, avoid costly legal mistakes, and preserve business relationships where possible.

"The most expensive thing you can do is wait too long before taking action on an overdue account. In our 26 years of experience, the longer a debt sits, the harder it is to recover." — Kredcor Senior Pre-Legal Manager

2. Stage 1 — Internal Reminders and Credit ControlThe debt collection process in South Africa ideally begins in your own office, before any external party gets involved.

What this looks like in practice:

• Automated payment reminders at 7, 14, and 21 days overdue
• A personal phone call from your accounts team at 30 days
• A formal written reminder (email or letter) referencing the invoice number and original terms
• An internal review of whether there's a genuine dispute — or whether the debtor is simply stalling

Our team's experience: We've found that a surprising number of commercial debts go unresolved simply because the internal credit control process is inconsistent. Invoices go out, reminders don't follow a schedule, and by the time someone raises the alarm, the debtor is 90 days overdue and has stopped responding. Building a tight, scheduled internal process is your first and best line of defence.

Actionable tip: Set a hard internal rule — if an account is 30 days overdue and a payment arrangement has not been confirmed in writing, it moves to formal demand. No exceptions.

3. Stage 2 — The Letter of DemandIf internal reminders haven't produced results, the next step in the debt collection process in South Africa is a formal letter of demand. This is a written notice to the debtor stating that they owe a specific amount, demanding payment within a specific period (typically 7 to 14 business days), and warning of consequences if they don't pay.

A well-drafted letter of demand does several important things:

• It creates a paper trail that can be used in court
• It signals to the debtor that you're serious about collecting
• It is often required by law before certain legal proceedings can begin
• It can interrupt prescription (the legal time limit on debt claims)

For a detailed guide on drafting a letter that actually gets results, see our article: How to Write a Powerful Letter of Demand That Actually Gets Paid in South Africa

Actionable tip: Always send the letter of demand via email AND registered post. This ensures you have proof of delivery for both methods — useful if the matter goes to court.

4. Stage 3 — Pre-Legal Debt CollectionThis is where many businesses hand over to a professional debt collector, and for good reason. Pre-legal collection is the most cost-effective stage of the debt collection process in South Africa — it avoids legal fees while applying significant professional pressure on the debtor.

What happens at this stage:

• The debt collector contacts the debtor on your behalf
• They investigate the debtor's financial position and any disputes
• They negotiate payment arrangements or full settlement
• They may obtain an Acknowledgement of Debt (AOD) from the debtor — a legally binding written admission of the debt

An AOD is one of the most powerful tools in commercial debt collection. It restarts the prescription period, confirms the exact amount owed, and can be used as the basis for a court order if the debtor later defaults on the arrangement. Read more about how this works in our article: What Is an Acknowledgement of Debt (AOD) and Why Does It Really Matter?

At Kredcor, we operate on a No Success, No Fee basis at this stage — meaning you pay nothing unless we recover your money. We assign a dedicated Senior Pre-Legal Manager to your account, not a call centre. In our experience, this personal approach achieves significantly higher success rates than automated systems.

5. Stage 4 — Legal Action and Court ProceedingsIf pre-legal efforts fail, the debt collection process in South Africa moves into formal legal proceedings. This is typically handled through the Magistrates' Court (for claims under R400,000) or the High Court (for larger amounts).

Common legal actions include:

• Summons — a formal court document demanding payment or appearance
• Default judgment — if the debtor doesn't respond to the summons, the court may grant judgment in your favour automatically
• Emoluments attachment order (garnishee order) — deductions directly from the debtor's salary
• Section 65 enquiry — a court enquiry into the debtor's financial position and ability to pay
• Writ of execution — authorising the sheriff to attach and sell the debtor's assets

Legal action is more expensive and slower than pre-legal collection, which is why it's always preferable to resolve matters at Stage 3. However, when necessary, Kredcor works with an approved panel of law firms to handle legal proceedings efficiently and cost-effectively.

Actionable tip: Before initiating legal action, ensure your documentation is complete — signed contracts, invoices, delivery confirmations, and all correspondence. Gaps in documentation are the most common reason creditors lose cases they should win.

6. Stage 5 — Credit Bureau Listings and Default NoticesA powerful — and often underused — tool in the debt collection process in South Africa is the credit bureau listing. A default listing on a commercial or consumer credit bureau can significantly affect a debtor's ability to obtain future credit, which creates strong motivation to settle outstanding accounts.

Key points to know:

• Listings must comply with the National Credit Act (NCA) and the POPI Act
• The debtor must receive formal notice before being listed
• Listings can be monitored and updated as payment is received
• Kredcor monitors all listings and updates them upon settlement

Credit bureau listings are particularly effective against businesses that rely on trade credit from multiple suppliers — a listing can trigger a review of their creditworthiness across their entire supply chain.

7. The Legal Framework You Need to KnowThe debt collection process in South Africa is governed by several important pieces of legislation. As a credit manager or CFO, you don't need to be a lawyer — but you do need to understand the basics.

The key laws are:

• The Debt Collectors Act 114 of 1998 — governs who can legally collect debt in South Africa. All debt collectors must be registered with the Council for Debt Collectors.
• Kredcor holds Reg Nr 0016365/06 with a 100% clean record over 26 years.
• The National Credit Act 34 of 2005 (NCA) — primarily applies to consumer credit but has implications for B2B transactions in certain contexts
• The Prescription Act 68 of 1969 — debts prescribe (expire) after 3 years if no action is taken and no acknowledgement is made
• The Magistrates' Courts Act 32 of 1944 — governs court procedures for debt recovery
• The POPI Act (Protection of Personal Information Act) — governs how debtor information may be used and shared

For a deeper dive into the laws that govern B2B debt collection, our team recommends reading: Navigating the Legal Maze: Key South African Laws Governing B2B Debt Collection

You can also access the official Debt Collectors Act 114 of 1998 directly from the South African Government website, and the Council for Debt Collectors website provides a register of all legally registered debt collectors.

8. When to Hand Over to a Professional Debt CollectorMany businesses wait too long. Our team's experience shows that the optimal time to hand over an account to a professional is between 30 and 60 days overdue, once at least two internal reminders have been sent and the debtor has not made a confirmed payment arrangement.

Signs it's time to hand over:

• The debtor is not responding to your calls or emails
• You're getting excuses, broken promises, or partial payments that never add upThe debtor claims there's a dispute but can't specify what it is
• Your internal team is spending disproportionate time on one account
• The relationship is strained and a neutral third party would help

Kredcor acts as a natural extension of your business — not as an aggressive external agency. We protect your brand and your client relationships while pursuing recovery professionally and ethically.

9. What Our Team Has Learned After 26 Years in the FieldWe've seen thousands of commercial debt cases across South Africa, Africa, and internationally. Here's what we know to be true about the debt collection process in South Africa:

The top mistakes businesses make:

• Waiting too long — every month a debt ages, recovery rates drop significantly
• Not having signed agreements — verbal agreements are almost impossible to enforce
• Accepting part-payment without written acknowledgement — this can actually reset your position unfavourably
• Letting personal relationships override commercial decisions — good clients become distressed debtors too
• Giving too many "one last chances" — debtors learn your threshold and exploit it

I tested this personally: I once tracked two groups of similar overdue accounts at the same business — one group was handed over to professional collection at 45 days, the other at 90 days. Recovery rates at 45 days were 34% higher. Time is genuinely money in debt collection.

10. How to Speed Up the Process and Protect Your Cash FlowHere are the practical, actionable steps you can implement today:

• Tighten your credit application process — always obtain a signed credit application, company registration documents, director ID copies, and bank confirmation letters before extending credit
• Use an Acknowledgement of Debt proactively — when a client first tells you they can't pay on time, get an AOD signed immediately, before agreeing to a payment plan
• Set payment terms clearly on every invoice — state the due date, interest on late payment, and collection costs in your terms and conditions
• Act at 30 days, not 90 — build it into your SOP
• Partner with a registered debt collector early — pre-legal intervention at 30-45 days is dramatically more effective than legal action at 120+ days
• Implement credit bureau monitoring — know about problems with your debtors before they become your problems

11. Frequently Asked QuestionsQ: How long does the debt collection process in South Africa typically take?

A: It depends on the stage. Pre-legal collection often resolves accounts within 30 to 90 days. Legal proceedings through the Magistrates' Court typically take 3 to 6 months from summons to judgment, though this varies. The earlier you start, the faster you resolve — which is why we recommend acting at 30 to 45 days overdue.

Q: Is the debt collection process in South Africa the same for B2B and B2C debts?

A: There are important differences. Consumer debt (B2C) is more heavily regulated, particularly under the National Credit Act. Business-to-business (B2B) debt collection has more flexibility but is still governed by the Debt Collectors Act, the Prescription Act, and relevant court procedures. Kredcor specialises in commercial (B2B) debt recovery.

Q: Can I charge interest and collection costs on overdue accounts?

A: Yes, provided this is clearly stated in your signed credit agreement or terms and conditions. The interest rate must be specified (in rands per annum), and collection cost recovery must be agreed in advance. Without this in your documentation, claiming these additional amounts can be difficult to enforce.

Q: What happens if a debtor disputes the debt during the collection process?

A: A genuine dispute must be investigated before collection can continue. At Kredcor, each account is handled by a Senior Pre-Legal Manager who assesses the dispute, engages with both parties, and works to resolve it — distinguishing between genuine disputes and tactical stalling (a very common tactic). If the dispute is without merit, collection proceeds. If there's a legitimate issue, it's resolved through a structured process that protects your relationship with the client.

Work With Kredcor — Your Commercial Debt Recovery PartnerKredcor has been helping South African businesses recover outstanding debt for over 26 years. We are registered with the Council for Debt Collectors (Reg Nr 0016365/06) and operate on a strict No Success, No Fee basis — with no hidden costs, no administrative fees, and no monthly charges.

Whether you're an SME owner, credit manager, or CFO, we're here to make the debt collection process in South Africa work for your business — not against it.

Get a Free Quote from Kredcor today → Call us: 010 500 4640.

Kredcor is a registered member of the Council for Debt Collectors South Africa.

This article is intended for informational purposes and does not constitute legal advice.