It can be frustrating for small businesses to deal with clients that avoid paying for goods or services provided. How can businesses collect outstanding debt in a legal and efficient manner?
There are many situations where businesses might be forced to collect outstanding debts. Some clients might purposely avoid paying for services, while other clients might have every intention of paying their debt but are currently struggling financially. Small business debt collection can be tricky, but you should be as compassionate as possible when attempting to collect debts.
While business owners may not be able to collect every outstanding debt, there are some strategies and methods that could help them finally get the money owed to them. Here are some ways to collect outstanding debts for your small business.
There are some situations where a client might be happy to pay their debt or invoice, but they simply forgot about it or haven’t gotten around to it. The best thing to do is to send reminders about the amount of money that they owe you and reach out to them with a phone call before taking any further small business debt collection steps.
If you are currently working on a project, you should also inform them that you are not going to continue working on the project until the payment issue is resolved.
Hire A Collections Agency
There will be situations where the best option is to hire a collection agency for small business debt collection. Before you decide to hire a collection agency, you should consider the age of the debt. The age of the debt is an integral factor in determining whether the money can be recovered or not. In short – the older the outstanding debt, the more difficult it is to collect.
Business owners should also do some research regarding consumer rights and debt collection. Obviously, small businesses should ensure that they are only working with legitimate collection agencies. You may also want to consider first hiring a collection agency to write a demand letter at a fixed rate, before hiring them for additional services.
Make An Offer
At some point, the best strategy may be for the small business to make an offer to settle the debt. Let’s say that you have a client that owes you $15,000, but is 120 days past due on the payment. At this point, it might be better to work with the client and figure out how to settle the debt.
For example, you might suggest to the client that they can pay $10,000 and you are willing to call it even. While this might not be ideal in every situation, you may find that the client is happy to take this offer. If you were planning on completely writing the debt off, it’s easy to see how taking $10,000 is better than nothing! You can then focus on scaling and marketing your small business rather than worrying about that particular debt.
Keep Records And Documents
It can be incredibly frustrating for a small business to collect an outstanding debt. It is important to remain calm and respectful during your attempts to settle small business debt collection, despite your personal emotions regarding the matter.
For More Information
Small businesses should always consult with local laws and regulations regarding outstanding debt collection. No small business should resort to illegal methods for small business debt collection, and there should be reminders sent before more formal action is taken. Regardless, there should be no harassment tactics with respect to small business debt collection.
After a certain period of time, it might be best to consider legal action if the debt is significant. Ultimately, this depends on your personal relationship with the client, the amount owed, and the amount of time since the debt was first incurred. It’s also best to act as quickly as possible with respect to small business debt collection, and remain persistent without harassing any clients or customers.
If you are interested in finding out more information about small business collection, you may want to also read our article about a small business owner’s guide to collecting unpaid debts.