20 Aug Small Business Debt Collection
At a certain stage, most of the companies will find a situation where a customer does not pay on time, refuses to pay completely, or cannot afford to pay the full amount for services provided. If you own a small company, you do understand how challenging it can be to recover debts. Payment collection for a small business is often one of the major challenges and failure points across the world. However, with a little practice and confidence, you must be able to reduce the number of late payments owed to you and even predict the customers who are not willing to pay.
Small business debt collection usually includes recovering monies owed to customers and clients that fall into the following three categories:
- Customers and Clients who will go to any extent to avoid paying.
- Customers who appear to have several payments due at once and sporadically pay them out.
- Customers who usually pay on time, but who cannot pay on consideration of financial difficulties.
In general, most of the companies want to make sure their consumers and clients fall into the last two categories as they can handle and work with them because these two category customers have a total or partial payment history. However, as a small business owner, you need to implement a strategy and method to determine which customers and clients are included in the first category and how to get their payments done.
Whether the customer is someone you know personally and have a great relationship with or a brand new client you’re upset with, it doesn’t matter — you have a responsibility and a right to collect the money that you owe. The best approach is how you handle these situations strategically. Most of the collection agencies are governed by the Fair Debt Collection Practices Act as it forbids any acts that might be viewed as harassment or fraud. The following are some useful hints for collecting the small business debts:
Harassing the people that owe you money is often considered as a bad practice in the debt collection management. if your actions are deemed as harassing, you might lose a customer and face a legal challenge. If you call your debtors, make sure that you don’t leave more than one message a day and never threaten or talk negatively of a debtor.
The letters you send to clients and customers owing money are called letters of demand. In addition to making phone calls, you should be sure to send these out. Save a copy of any letter you write. If you have to go to a collections agency, these documents and letters can be helpful.
Offer to Settle for Less
If you think that a debtor is willing to avoid the payment – it is always a good idea to offer a settlement for less than you are owed before simply writing off the debt. This is a strategy that was often used on clients and customers who are not willing to pay off the debt they owe. This settlement should be formalized in a legal document showing payment of less than the due which settles the entire debt.
Hiring a Collection Agency
If you have a lot of unpaid debts owed to you, and you spend a lot of time trying to collect on it, hiring a collection agency could be worth your time. This would not only save your time and potentially allow for better outcomes but also keep you out of legal problems. Although there are many debt collection agencies in India that have come into existence in recent years, most of them are not providing comprehensive and professional debt recovery services. But we at, Kenstone Capital works with a dedicated team of Business to Business Debt Collection experts to recover long-standing and long-forgotten dues.
Keep Your Tele-Conversations Short and Formal
Always ensure the person at the other end of telephonic conversation does not take the phone call offensively. Do not mean that failure to make a payment is equivalent to a personal failure. Be sure to remain calm throughout the discussion, but always assert that there is a debt that need to be paid.
File a Lawsuit
If you don’t want to go through a collection agency, you have the option to file a lawsuit in order to get the money that you are owed. Depending on your jurisdiction, you might be entitled to file a lawsuit in a small claims court for recovery of the money owed to your company.
Know Your Rights
If you don’t have any formal experience in receivable accounts or debt management then you’re probably shuffling your way through the payment recovery process blindly. The more you educate yourself about your rights and legal possibilities, the better you can collect. By knowing about your rights, you will not only understand the actions that can and cannot be taken, but you will also be more positive in your interactions.
Debt Collection is always a daunting task and it could be more challenging in the case of small businesses. Sometimes you feel like you are a pushover and sometimes you feel like you are too harsh. But ultimately the goal is, you have to get your payments on time. Following the above-mentioned tips might guarantee success in your small business debt collection.