6 Tips for Collecting Business Debts

A major challenge for many business owners is clients who don’t pay on time. Following up on business debt can be a very frustrating and time-consuming process. You need to find a way of getting paid, and still maintain a good relationship with your customers, if possible. So, what are your options when it comes to collecting business debt?

1. Remind constantly

When a customer owes you money, you need to keep reminding them about it, constantly. If you don’t, you might never receive your payment. Get in touch with them as often as possible to find out the status of the payment. You could consider sending monthly statements via email, as well as making occasional phone calls. The more persistent you are, the more likely you are to get paid.

2. Hire a debt collector

If pursuing business debts is taking too much of your time, it would be appropriate to hire the services of a debt collection agency. Get in touch with a reliable agency in your area and explain your case to them. They will then tell handle the matter on your behalf. Most debt collection agencies require payment of a commission which is a percentage of the amount recovered.

3. Send a 'demand for payment' letter

When every other method of debt collection fails, it would be advisable to send your customer a ‘demand for payment’ letter. This letter should contain details about the payment deadlines, invoice number, the amount owed, and the prior collection efforts. At the end of the letter, remember to mention the consequences of non-payment. At times, the threat of legal repercussions will hasten the payment process. However, some customers will still ignore the ‘demand for payment’ letter. In such a case, make your threat good by initiating legal proceedings.

4. Small claims court

If the amount you are owed is not too large, you could consider taking your case to the small claims court. To file a claims action, you will be required to complete some paperwork. Once this is done, the court will then set a date for your case. The process is quite fast and the filing fees are reasonable. In addition, you don’t have to hire the services of a lawyer. However, you can only use the small claims court if the amount owed is little. You will need to find out the limits for the courts in your area.

5. Civil court filing

If the amount of money involved is considerably large, you will need to file a case in a civil court. Here, the process is more complicated and you will thus require a lawyer. To enhance your chances of getting paid, be sure to find a lawyer who has experience in debt-related cases.

6. Contact the authorities

Besides taking legal action, you should also consider contacting your country’s credit bureau and the Better Business Bureau (BBB). This will protect other individuals and institutions in future who might want to carry out business with your debtor.

Have you been a victim of non-paying customers? How did you handle it? Please share with us in the comments section below.