How to Collect Business Debts

Providing goods and services is your business but when dead-beat customers refuse to pay, you must absorb the loss. No one likes dealing with customers who seem to think you can afford to pay for their purchases but eventually, every business confronts a non-paying customer. Read on to learn how to collect business debts.

Instructions

Difficulty: Moderately Challenging

1. Send a congenial reminder that the customer’s account is overdue and ask for prompt payment. Occasionally, a statement will become misplaced and the customer will quickly pay you.
2. Follow up with a phone call asking if they overlooked the bill. Be gracious and inquire as to when you can expect payment. Call again in a couple of weeks if you don’t receive payment.
3. Offer to set up a payment plan if the customer has suffered unforeseen financial difficulties. This allows your customer to honor their debt by paying a smaller amount. Send a written payment plan to the customer and keep a copy on file.
4. Mail a demand letter asking for payment in full if the customer fails to adhere to a revised payment schedule. You can write one yourself but if the debt is large, consider having an attorney draft one and send it from his or her office. Often, just the threat of legal action is enough to jolt a lazy customer into action.
5. Hire a collection agency. When you don’t want to be the bad guy, call in the hired guns. These agencies specialize in writing letters and making phone calls to customers with outstanding balances on their accounts. They retain a portion of the amount collected as payment for their services.
6. File a lawsuit. This is a last resort since it will result in a very disgruntled customer but there are times when nothing short of legal action will help. Research your state’s monetary limit for a small claims action. If the debt is large, you will need to file the lawsuit in civil court.
7. Collect the debt owed you by filing a garnishment of wages. When you win in court, the judge will give you a judgment with which you can file a garnishment with the customer’s employer. Depending upon the person’s wage, you will receive a percentage taken out of every paycheck and mailed to you.

Tips & Warnings

• Be aware that some deadbeat customers know all the tricks. They will change jobs, making it necessary for you to file additional garnishments for each new employer.
• If a customer files for bankruptcy, you must cease your collection efforts and follow the directions provided by the bankruptcy court. In most cases, you will not collect any money if the customer files for bankruptcy.