Renovating a home is a good thing to do in most cases because it will make your property more appealing to potential buyers if you want to put it on the market, or if not, it will make everything more comfortable to live in. However, as we all know, remodels can get very costly, burn through savings, and aren’t always the best use of funds if not done well. As such, if you want to be smart about...
According to the National Federation of Independent Business, 64% of small businesses have unpaid invoices that are at least two months past due. It can be frustrating or downright infuriating when customers don’t pay on time, but if you want to collect the debt, you have to take the right approach. Here are five tips for collecting debt from customers.
1. Keep Calm and Follow Up
It may be tempting to yell at or berate a customer for not paying what is owed to you, but going this route may make the customer even less likely to pay.
Stay calm, and follow up. Use your accounting software to find out when the payment was due. Next, send a polite letter to the customer reminding him or her about the payment. Create a standard letter that can be sent to any client with past-due payments. End the letter by asking the customer to contact you personally to discuss payment.
2. Make a Phone Call
You sent a letter to the customer, and you waited 30 days for a response. You haven’t received payment or heard a word from the customer. What’s the next step? Make a phone call.
Phone calls are hard to ignore, and customers are more likely to explain their reasoning for the late payment when talking on the phone.
Remember to be polite, and do not go overboard with making phone calls. Calling every day or using threatening language in your calls may be considered harassment or abuse under the Fair Debt Collection Practices Act.
3. Don’t Make Threats
Do not threaten the customer in any way or get angry. Remain calm and behave professionally. Remember that your actions will not only have an effect on your likelihood of recouping the debt, but will also impact your company’s image and reputation.
Ideally, you want to recover all of the money you’re owed. Consider offering the client an installment plan. You may be able to charge interest or late fees, but this will depend on your assessment of the client’s financial situation. If these fees will make it even more difficult for your client to pay, you may just want to stick to the original amount.
If it’s clear that you won’t recover all of the money that’s owed, you might consider settling at a lower price. Recovering some of the money owed is better than recovering nothing at all.
4. Take Legal Action
If the customer is still being uncooperative at this stage, it may be time to take legal action. A lawyer can write a demand letter on your behalf. A demand letter is a certified written letter that threatens the customer with legal action if the debt is not paid.
5. Hire a Collection Agency
If you’d rather not get involved in a court case, you can hire a debt collection agency instead. Collection agencies will take a percentage of the money that’s owed to you. Some agencies buy the debt outright and handle the collection. Either way, you will likely only get a fraction of the money that’s owed to you.