Delinquent customers are an inevitable part of doing business. People don't like to fight for the money that is rightfully theirs, but at some point they have to. Establishing a system for how you deal with payment problems (e.g. late payment, nonpayment) and making sure your customers are aware of the penalties before they occur is important for managing debt collection issues, as well as keeping issues to a minimum. The best way to avoid going down that road is to have a system that quickly and easily alerts you and your customers when they are falling behind and missing payments. This makes both parties aware of the delinquency and enables you to act quickly before the problem gets any worse.
When customers fail to pay, your first few steps should be polite, friendly reminders that payment is due. Send letters, emails or telephone calls, whatever it takes to convey that you're not going to simply let this go (without threatening the customer of course). The key is to make sure that you are playing nice. Say something like, ?I see that you're a little late on your payment. Is there anything we can do to help you out?? This gives your customers a chance to explain the delinquency and let you know what their next actions will be. If they're having trouble making one lump payment, try to work out some type of payment plan that works for both parties.
When the polite approach doesn't work, it's time to get tough. At this point you really only have two choices, take the matter to small claims court or turn the debt over to a collection agency.
If the amount of money is substantial enough to be worth the hassle but doesn't exceed the amount your state allows you to recover, then small claims court is a good option. With filing, waiting for a court date and then waiting for actual collection to take place, going this route may take a long time. The nice thing about going to small claims court is that it's a relatively easy and inexpensive process. You simply file the paperwork and wait for the court to set a date. Then you go and argue your case before a judge. Decisions are usually handed down that same day. You don't need a lawyer and filing fees are typically about $40. One thing you have to remember, however, is that the onus is on you to present evidence and documentation to help make your case.
Working with a collection agency can be nice because you won't have to do any of the leg work to track down the money. Unfortunately a large chunk of the balance due will go straight to the agency, so you won't actually get all of your money back. Many collection agencies will only take on debt that they think has a modest chance of success, so be aware that you may not be able to simply dump your delinquencies on them. If you do decide to go with a collection agency, try to find one that has experience in your field and insurance against debtor lawsuits.
If the amount of money is substantial or extreme, consult a lawyer to take you through the process. If the amount of money is small and won?t make much of a difference, then consider letting the delinquency slide. In this case it?s better to move on to other things than to let the problem linger.
