8 Tips For Small Business Debt Collection

A couple goes over finances with a computer and a calculator

Money is the lifeblood of any business and the loss of any expected revenue can have major consequences. Getting paid what you're due on time is important to every company, but many businesses run into customers from time to time who are unwilling or unable to pay debts. When this happens, it's up to you to collect what you're owed. It's an unpleasant situation to have to pursue people who may be in financial trouble, but there are things you can do reach a resolution regarding outstanding debt. One of the best benefits of our Small Business Legal Subscription Plans is the ability to contact your attorney for help in collecting debt and devising a debt collection strategy for your business. All of our small business plans include attorney-drafted debt collection letters on their law firm’s letterhead and sent to your debtor on your behalf. This saves you time and worry as letters from an attorney are often taken more seriously by debtors than communication from you or your business. And when the debt is paid, you get 100% of the amount recovered - our network attorneys take no commission for these services.

Traditionally, there have been three main ways for small businesses to collect a debt: doing it yourself, hiring a collection agency, or work with a debt collection attorney. Going the do-it-yourself route to collect on a debt owed to your business may be a good way to go if client relationships are important to you or if you only have a couple of debts to collect. Hiring a collection agency may be a good way to go if you have a large number of delinquent accounts from debtors who are hard to track down, but collection agencies often take up to 50% of the amount recovered as part of their fees and aggressive tactics sometimes used by collection agencies may reflect poorly on your brand. Hiring an attorney specializing in debt collection is often a quick way of getting delinquent accounts paid and maintaining a customer-friendly brand. And since our Small Business Legal Subscription Plans start at just $49/month with debt collection services included, it’s affordable, too!

When your business is owed money, regardless of the method you choose to collect on the debts, there are some tips for legally collecting money owed to you:

Don't take it personally

Late payments can often be caused by simple forgetfulness and getting emotionally invested in the problem can often escalate a simple oversight into a true dispute. Contact the client or customer to let them know about the late payment; most people are happy to rectify the problem promptly.

Get In Contact Early and Stay In Contact

Reach out to the debtor as soon as possible and remind them of their obligation. Continue to reach out regularly if the payment isn't made right away. Contact can be made via email, telephone, texts, or mailed letters, but don't get too carried away. Anything beyond a single contact in a billing cycle could be considered as harassment. Your messages should be professional and never threatening.

Document, Document, Document

Keep copies of all letters you send, make records of every call you make, and screenshot texts and emails for your records. If the matter should need to be referred to a collection agency or an attorney, your records will go a long way to establish your case.

Try To Set Up A Payment Arrangement

Most people aren't trying to shirk their responsibilities, but financial difficulties sometimes make full payments impossible. Businesses are entitled to seek full repayment, but relationships with clients and customers can often be preserved by working with the debtor to agree to a payment plan on what's owed. You might agree to lengthen the repayment period or to accept partial payments on a schedule until the debt is paid off. Make sure to get the terms outlined in writing.

Maintain Your Resolve

You may choose to be flexible about repayment, but you should never let debtors tug at your heartstrings to get out of paying the debt. Again, any agreements made regarding lowering the amount owed or accepting partial payments should be put in writing.

Send Demand Letters

All actions taken in the process of collecting a debt should be put in writing or recorded in some way for your records. Demand letters notify your debtor of the amount they owe and any potential legal action that might be taken in order to collect the debt. These letters should convey your seriousness about collecting the money owed you and provide a record of attempts made to collect if you need to escalate the matter.

Hire A Collection Agency

When all your attempts to collect a debt have failed, you may want to consider hiring a collection agency. Collection agencies are professionals at drafting demand letters and have employees and staff to call debtors so you can focus on running your business. Collection agencies don't work for free and some businesses are uncomfortable working with an industry with the collective reputation that collection agencies have.

Work With An Attorney

An alternative to hiring a collection agency is to work with your attorney to seek repayment from debtors. Much like a collection agency, your attorney will take over the work of contacting those who owe you money by making calls and drafting letters on your behalf, and these contacts are often taken more seriously by debtors, as they carry the weight of the experience of your attorney's legal expertise and background, as well as the possibility of further legal action if the debt remains unpaid.

Businesses considering legal action for debt collection purposes should know that the court process can be both expensive and time consuming, as well as keep you from the day-to-day details of running your business if you have to appear in court. Winning a court case against someone who owes you money also means that you still have to collect from someone who has not paid you thus far. The upside of winning a collections court case is that you now have more options for collecting what you owe. The judge can choose to put a lien on property, or order a writ of execution that garnishes wages. The debtor may have to liquidate assets to repay debts if they are in bankruptcy or work with the court to create a repayment plan that will be enforced by the court.

Learn more about how your attorney, through your Small Business Legal Subscription Plan, can help you collect debts both in and out of court or sign up today!