Debt Recovery from customers is a balancing act for business owners. Getting the money is important, but not offending or alienating customers is also a goal in business. Although the specific procedures for collecting a debt can vary, a company needs to follow several general guidelines to ensure collection while trying to retain customers for future sales.
The first step in collecting a debt from a customer is to send him a second invoice clearly marked as overdue. If the customer neglected to pay because of a simple oversight, he may rectify the account quickly. Invoices should be sent at 30-day intervals.
Call the person in charge of paying the invoice and remind him the account is past due. Ask for the total balance to be paid. In normal procedures, where a finance charge or interest is added to a past-due account, point out this fact. Remain resolute and committed to collecting the debt but be professional and courteous.
Listen and Negotiate
Listen to the customer’s response and try to be understanding while remaining firm. He may have a legitimate reason for being late in paying the bill. Offer alternatives without conceding the debt. For example, the customer may have had an unexpected financial situation that forced him to postpone payment. If his payment history had been good, a restructure of payments may be acceptable. However, if the customer has had a history of late payments, leniency may not be the best approach.
A licensed debt collection agency may agree to collect an overdue debt for a percentage of the balance due. The procedures used by debt collectors are governed by the federal Fair Debt Collection Practices Act, which prohibits overly aggressive or invasive tactics. Businesses also must follow state laws on debt collection.
When you have made several contacts with a non-paying customer and he hasn’t resolved the account, you may need to consider legal action. Small-claims court is one route a business can take to collect overdue debts. However, for significant amounts beyond small claims, the services of an attorney are recommended.
Resources for Debt Recovery