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5 debt collection tips for small businesses

On Behalf of | Jan 10, 2021 | Business Law

Every business must deal with clients and customers who try to avoid paying their bills. It is an unfortunate part of doing business. How you handle this situation may depend heavily on the type of business you are in and the amount your customer owes you. You deserve payment for the work you do no matter the situation, and some debts may be large enough to jeopardize your entire business. Here are a few tips for collecting debt:

Issue a clearly itemized bill

You may have already done this as a matter of course. It is important that clients know exactly what you did for them and what your bill covers. This also creates a written record for any future disputes. They may have simply lost track of the bill and need a reminder.

Contact them regularly and in different ways

Individuals and businesses today have a wide variety of skills with the use of technology. Some may only respond to a paper bill sent in the mail and others may only respond to online communication. As you send multiple reminders, use a variety of techniques and become more assertive over time.

Know when to hand the debt over to a professional

After multiple unsuccessful attempts, you may need to decide whether to write off the bad debt or bring in a professional debt collection agency or an attorney. They will continue to pursue the debt on your behalf.

Follow the Fair Debt Collection Practices Act (FDCPA)

The law regulates what you can and cannot do in an attempt to collect a debt. The FDCPA covers the way in which a debt collector may contact a debtor, including frequency, language used and manner of contact. New rules just went into effect in December 2020. These rules mainly apply to debt collection agencies, but you should be aware of them. If you hire a collection agency and they do not follow the law, you could face liability.

Bringing legal action

Legal action is often viewed as a last resort, but a necessary one in many circumstances. The law allows for many types of claims and lawsuits to help you recover your money.

Your business deserves to be paid for the goods and services you provide. Collecting on debt may not be a part of your business that you look forward to, but you have many tools and resources available to help.