Every company eventually encounters a customer that does not remit payment when due or attempts to skip out on payment altogether. Of course, the most obvious way to avoid this situation is to receive payment up front. When this isn't possible, create a written agreement signed by both you and the client before extending any form of credit. It doesn't have to be fancy and intimidating"at the very least the agreement should spell out specific terms related to the amount owed, the goods or services that are provided, and the specific date the amount is due. You should decide if you are going to tack on interest or penalties, and be frank about this up front so your customers are not blindsided and feel they are being swindled. Always err on the side of a personal guarantee when dealing with a company. This allows you to sue the owner personally for the money owed and not just the business. This is important because many times a business can look cash poor even while the owner is still making a tidy profit. Moreover, if the business fails, you can’t request of or expect the owner to pay you unless he or she has personally guaranteed the contract. A personal guarantee may allow you to garnish the owner’s wages and/or put a judgment on the owner’s house.
When any customer falls behind in their payment, you should be quick to remind them of their obligation to pay, and do it regularly by sending statements showing past due balances. Regular communication can aid in preventing nonpayment from happening, and you may even find that the customer simply forgot or misplaced an invoice. Many customers today are tight on money, but that's no excuse not to pay for something they knowingly purchased. Work out a payment plan with them if you have the room to be flexible. When making communication attempts, stick to the facts and be tactful and professional. Never harass, threaten, or use foul language, and certainly don't joke, apologize, or minimize the debt. Don't share why you need the money or whether you have financial problems. This is their debt therefore it is their problem. If you have an assistant who isn't connected to the actual transaction, have him or her call for you. He or she will stick to the facts and be less likely to get emotionally involved. Likewise, the client can't get into specifics about the transaction if the caller isn't the one who completed it.
Always respect customers’ privacy. Here are some big no-no's when attempting to collect payment:
" Sending text or email messages that will be read by anyone other than the person who owes you money.
" Contacting any third parties or discussing the debt with anyone other than the person who owes you money.
" Contacting an individual at their work.
" Sending a past-due notice that will be received, seen, and/or heard by someone other than the person who owes you money.
" Making phone calls that do not fall within the allowable hours, which are defined as between 8am and 9pm by both the TCPA and the FDCPA.
When all else fails, you can turn the account over to a collection agency, take the client to small claims court, or hire an attorney to write a collection letter or start a lawsuit. These steps will depend upon the amount of money owed and whether the money you put into it is going to be worth what you'll collect in the end.
