Small business owners wear many hats. Besides maintaining the primary business, owners must keep up with several tasks to keep the company running. One of the least pleasant tasks is to collect overdue debts owed by customers. While unpleasant, the task of debt collection is a necessary evil that is essential to the survival of the business. In fact, according to a recent poll conducted by American Express’s OPEN Small Business Network, the number one cash-flow concern of small business owners is the issue of accounts receivables.
As a vital element of a business’s success, it is important that the issue be handled with tact. After all, it is not just the payment at stake, but also repeat business and ultimately, the reputation of your business. Your attitude and patience with non-paying customers will have consequences on your image and on your chances of having the debt repaid.
It is important to keep this mindset when collecting a debt from a new customer. It is possible that the whole issue was just an oversight. Coming on too strong with a fight to claim a debt could damage a business relationship that could have great potential. If the debt owed is from an established customer, the best option is to evaluate their payment history. If they had trouble in the past with providing prompt payment, that is a fact worth considering.
Typically, non-paying customers fall into one of three categories:
If reaching out with a gentle reminder does not produce results, it is necessary to become more assertive. It is a good idea to build up your efforts gradually, but to also be frequent with your requests. Keep in mind that the longer a debt goes unpaid, the less likely payment becomes. Varying communication methods are one way to keep the reminders coming, while leaving the working relationship intact. Requests can be made through email, over the phone, or by certified letter.
Be sure to document all exchanges you have with your customer. These notes may come in handy if you need to refer to them in the future. For example, if a customer makes a promise and then reneges, detailed notes on the agreement would be helpful. Above all, avoid harassing or demeaning a customer over payment. Such an approach works against your efforts to come to an agreement and there are other avenues a business can take to achieve the goal of eventual payment.
Once it has been determined that a customer is unlikely to pay their debt in full, small businesses can offer to settle the issue for less than the amount owed. This may be enough to appeal to the customer and make them pay. If not, the account can be turned over to a collection agency. As a last resort, a small business may decide its best course of action is to address the matter in small claims court.
Small Businesses who need representation in debt collection proceedings should reach out to the experienced small business lawyers at MacMain, Connell & Leinhauser. Call us at 484-318-7106 or fill out an online contact form today. We represent clients throughout Philadelphia and Chester County from our office in West Chester, Pennsylvania.