As a small business owner, you appreciate each customer you have. What’s more is that you likely don’t want to step on anyone’s toes or jeopardize your relationships. Unfortunately, there might be times when you have to approach your clients about an overdue unpaid debt. Make sure you’re armed with an effective and legal strategy that works out best for everyone involved.
Know the Type of Customer You’re Dealing With
Before you start sending letters and making phone calls, find out what kind of customer you’re dealing with. Categories include:
- Customers who seem to go out of their way to avoid paying.
- Customers who have multiple payments due at the same time and take care of them intermittently.
- Customers who usually pay on time but are experiencing financial trouble.
The type of customer you’re dealing with will dictate how you proceed. The last two are often the easiest to deal with, but you may have no choice but to turn to either a collections agency or litigation to get the money you’re owed. In any case, act quickly to collect a past due payment and keep pursuing the customer until all debts are clear.
Don’t Harass Them
No matter how much of a debt you’re owed or how much customers seem to be dragging their feet, try your best not to harass them. Doing so could result in charges brought against you and the customer abandoning your business entirely once the debt is settled. Don’t reach out to the customer more than once every day or every other day. Always assume the best about good customers, but make sure you’re well prepared for the worst.
Write a Letter
While electronic communication has become the preferred method of correspondence, sending physical letters still has its uses. Not only do letters serve as reminders every time the recipient looks at them, they can also be useful in establishing a timeline should you have to turn the debt over to a collection agency. Just make sure you keep a copy of sent demand letters for your records.
Keep Phone Conversations Concise
Whenever you call a customer with an unpaid debt, try your best to remain as cordial and understanding as possible. Just as customers don’t like to be harassed, they also don’t like to feel threatened or insulted. Keep the conversation short and formal, make sure the customer understands what the debt is for and how much it is, and let her or him know the debt due date.
Consider Settling for Less Than What’s Due
One reason a customer may not have paid you yet is because she or he only has a portion of the money owed. If you don’t mind receiving less than what’s due, and you want to maintain your business relationship, you may want to see if the customer would be willing to enter a legal agreement that shows you accepted a reduced payment that satisfies the entire debt.
Turn to a Collection Agency
If your efforts to collect an outstanding debt prove fruitless, it may be time to bring out the big guns. Before turning the debt over to a collection agency, you might want to have the agency first draft a demand letter. This is an especially good option if you’ve never written such a letter before and want to make sure you do so correctly. For more extreme measures, collection agencies can also take over the collection process. Know that you have to pay for letters from an agency, and they might charge as much as 50 percent of whatever debt they manage to collect. While it’s ideal to have customers pay you on time (or even early), it doesn’t always work out this way. Be clear on the actions you legally can and cannot take, and give customers the benefit of the doubt. Doing so improves your chances of successfully collecting payment and retaining your customers.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.