Debt Collection Strategies for Your Small Business
Debt collection can be an uncomfortable topic for many small business owners. Very few people get into business to pursue debt. There are many ways to approach debt collection and almost all of them require some level of finesse. If you are having issues collecting receivables, keep your cool.
Do Not Take It Personally
Too often, small business owners get upset right away when a client misses a payment. There are tons of simple reasons why this could happen:
- Sometimes people just forget things;
- The client could have misunderstood the payment terms;
- You could have forgetting to send them the invoice;
- There could have been a technical issue for the payment.
Before you raise arms against the client, make sure you cover your bases by checking on the simple stuff.
After You Have Checked Yourself
If you are sure you did everything correctly, stay calm. You do not want to attack a client because this gives them less incentive to pay you. People do not respond well to aggression and as soon as the client decides they no longer need anything from you, they lose the urge to resolve the matter. Before things get intense:
- Send a friendly reminder. Ask them if they need help with anything or if an extension might help;
- Experts say, treat each instance as if it was the first time the client has missed a payment;
- Keep all initial contact as positive as possible.
So, positivity has gotten you nowhere. Now what?
Things You Should Not Do
Maybe most importantly, you should understand what you cannot do. First, you should take a look at the Fair Debt Collection Practices Act. If you violate that, you could be facing fines that are a lot worse than the debt owed. For example, you cannot:
- Contact the client at odd hours (before 8am or after 9pm);
- Use intimidation tactics;
- Threaten them with a lawsuit unless you actually intend to sue.
Things You Should Do
Well, there are some things you can do to increase the probability that you collect the debt and retain the customer (if you want to):
- From the beginning, document every point of contact with the client;
- If you think it will help end the matter and satisfy at least part of the debt, offer to settle for less than the amount owed;
- Hire a collection agency. This will probably net you the lowest amount of money, but it is better than nothing.
If your small business is owed a substantial debt and you are not sure how to handle it, you need help. It may be best to hire a skilled attorney. Elias Dsouza of Dsouza and Strachan Lawgroup has been supporting the small business owners of Broward County and Plantation, Florida for over 15 years.