We are in business to provide customers with our products or service — and get paid in return. But what if the customer does not pay? How should we collect on the payment? What are our options?
According to the book “The Law (in Plain English) for Small Business,” we basically have three options:
1. Do Nothing. If the amount is small enough, collecting the payment may be too much of a hassle compared to the amount to be collected. Of course, not collecting on the payment means you also need to stop dealing and servicing the customer.
2. Hire a collection agency. Collection agencies will cost you, but they will do the work of running after the deadbeat customer. Some will charge you a commission (as high as 50%) based on the recovered amount. Others will charge you a fixed fee, while some agencies will charge you an upfront fee in exchange for lower percentage of the collected amount. Be careful though that the collection agency follows the federal and state rules and procedures for collecting payments; otherwise, you can get in trouble for their misdeeds.
3. Sue the non-paying customer. If the amount to be collected is large and the customer failed to respond from previous efforts to collect the money including formal demand for payment, then you can file a lawsuit against the customer. You can file a case in a small claims court or in a conventional court.
That’s way more clever than I was expecting. Thanks!
I have experience working for a company that helps accepet payments and depending on the amount and frequency of the payment you are trying to collect, offering a wider variety of payment solutions to customers could curve the rate in which don’t pay. Like Sergio mentioned, you might want to offer payment options — but instead of just cash and check why not give them online payment options? Online payments not only enable echeck and credit card payments, they also simplify payment collection processes, increase on-time collections, and improve customer service. Yes, there are options to collect your payments, but there are also steps to avoid the situation altogether, e.g. recurring billing.
You need a client debt management reduction plan to deal with those instances when a customer keeps giving excuses or refuses to pay you.
Here are some helpful procedures to follow:
• You should call the customer directly, instead of sending him/her e-mails, invoices, etc. and create a sense of urgency.
• Be precise with your client. You must give him/her a definite deadline for payment in full.
• You may want to offer your client a payment option: cash or check.
• Also, you could use a third party as an excuse. Tell your client that you need the money to pay one of your suppliers or service providers.
In case these tips to collect your client debt don’t work, then go to the next level:
• Become a nuisance to your client. Send frequent e-mails, letters, faxes, calls, etc., and let him/her know you’re not going to give up easily. This annoyance may be incentive enough to pay you.