Calm & Collected - Recovering Bad Debt
Getting paid is an essential part of doing business, but dealing with delinquent bills can be tricky. How can small business owners best collect debts?
Unfortunately, at some point, almost every business will have trouble collecting debt from clients. It seems almost impossible to get payments on time, or from some clients, at all. You want your money, but you also don’t want to destroy business relationships in the process. So how do you walk the line between calm and collected? We’ve compiled a list of tips moving from gentle to gradually more forceful to help small business owners get the money they’re owed. And if push comes to shove, here’s some advice on how to choose the right collections agent.
USE AN EXPERT
Employ a collections agent.
This is the most forceful method of debt collection and is often reserved for when you have exhausted all other resources or the debt is 90-120 days past due. It is important to research collection agencies and choose one with knowledge of the Fair Debt Collection Practices Act (FDCPA) and that abides by the laws. Consult the Better Business Bureau for ratings on any agency you are considering. As far as fees are concerned, most collections agencies only charge when they collect. Most fees are negotiable but typically range from 4 to 25 percent, depending on the size of the debt.
“PERSISTENCE IS A KEY FACTOR IN SUCCESSFUL RESULTS. Most people know they owe the money, but it takes persistent follow up to get the debt recovered. Ask the agency how often they send out statements, emails and have phone conversations.” - MeKeisha Thomas, Principal Accountant, Inaugural Accounting Group
6 TIPS TO COLLECT
Before going to small claims or civil court, try these tips to get paid:
Include a self-addressed return envelope when mailing out invoices. This is a simple, non-aggressive way to make things easier for clients to mail checks and can help ensure it does not slip their mind—All they need is a stamp, and it’s done!
Send a statement with invoice and the mid-month amount due circled in red. A heads-up is always helpful.
Use the SquareUp app to provide another method of payment for clients that may be in a bind and need to use a credit card. It’s not overpriced, and you can swipe the client’s card on your phone. By using this method, you get your money.
Change the way you show up on caller ID with bluffmycall.com. If your calls are being ignored, and your messages going unanswered, this website allows you to set your number ID to whatever you wish, increasing your chances of speaking to the client trying to duck your calls.
Instead of sending certified letters, send the letter inside a UPS or FedEx package requiring a signature. No one turns down a package, so you’ll be notified that they have received the letter.
Get a credit card on file. Create a provision within your contracts stating that you have the ability to draft from the client’s account for overdue payments. In addition to the provision, get their routing and account number to draw from their account. This method is aggressive, but when dealing with repeat late-pay offenders, it ensures you don’t get cheated.
