- January 4, 2015
- Posted by: Taurus Collections
- Category: Uncategorized
For small businesses, problems with collection of business debt is not a matter of ‘if’, but ‘when’ you will have to deal with it. It can lead to the ultimate downfall of a company if you are not diligent and proactive about it. How you navigate this potential minefield is the difference between being sucked-dry of all income or relegating debt to a simple accounting figure. Being proactive and spotting problems before they become too big, or even before they happen at all is a major key to success.
In bookkeeping, this is what they refer to as debt, or payments that are owed to the business. You could just simply call up these debtors and demand your payment, or you can have a system in-place that can increase your success-rate of collecting business debt. The key is in being able to collect your debt, without having to pay more money to get it.
Late Paying Customers
You’ll find that the majority of customers are going to go quiet on you when it comes time to pay their debt. Those that do attempt to pay, even if they are unable to pay the full amount are easy to work with; late payment is better than no payment. If the customer is one who has gone silent and hasn’t talked to you about why they haven’t paid their debts, it is important to exhaust all your options first before jumping into litigation.
First, you should try as soon as possible to contact those who may be at-risk of defaulting on their payments and try to keep the lines of communication open. If you just send out repeated letters demanding payment, chances are they will never follow-up and drag it out as long as they can. Before you hand your debt collection duties off to an agency, try to be as personable as possible to the debtor, this may be seen as going out of your way to collect a debt, but for a small business, every victory counts, those debts add up fast.
Hire a collection agency
This is simply the natural progression for collection of business debt and your best hope to get through a non-responsive customer. The reason why it is important to act quickly and try to collect your debt before moving on to this step is because you will only be collecting about half of it through an agency. Something is better than nothing, of course.
Small claims court
This can be an alternative to hiring a collection agency. Don’t pay attention to those court TV shows, the cases often appear longer than how long it actually takes to reach a verdict. Small claims will often cost very little to collect, in comparison to hiring a collection agency. More than half of all small claims court cases are on behalf of small businesses, so that should give you an idea of how advantageous they can be for collection of business debt.