Eventually, every business runs into a client who either can’t pay or won’t.
It’s frustrating, it’s anxiety-inducing, and it puts you into the position of finding a way to recovery that money.
You may decide to turn to a company that specializes in commercial debt recovery. After all, they’re experts. They know how to collect money quickly and ethically.
But before you look for a debt collection company, you may want to attempt to recover the debt on your own. After all, your client is probably more agreeable to hearing from you than he would be hearing from a collection company.
If you decide to collect the debt yourself, there are a few things you should keep in mind. We’ve got the 7 most important things to know about commercial debt recovery.
Bad debt and unpaid bills start with the invoice. There are two key things you should be doing to every invoice to prevent bad debt from happening in the first place.
First, make invoices due upon receipt. The lack of a waiting period makes it more urgent and less likely that a client will forget to pay.
Second, include a late fee if your client pays after a certain amount of time. Stick to this fee. Having to pay extra is a great deterrent for bad debt.
When it comes time to collect on a bad debt, you may be tempted to keep your tone non-committal. After all, you don’t want to seem pushy and lose a client.
Truth is, though, if this is a client who isn’t going to pay their bills, do you really want them as a client?
It’s fine to keep the tone conversational and friendly, but be firm here. Your client owes you money for a service rendered. You are entitled to this money, and you are not rude to say so.
Commercial debt recovery should begin as soon as you know there is bad debt involved. When a client is delinquent, there is little time to delay, as your ability to collect on old debt may be time sensitive.
Your ability to collect on a date starts going down the day after the debt comes due, and your chances of full recovery continue going down the longer you wait to reach out to a client. Make sure you start the process early.
Email works great. So does regular paper mail.
The king, though, is still the phone call. It’s easy to say whatever you wish in an email. It’s harder to say no to someone whose voice you can actually hear.
Phone calls are still the single most effective way of collecting debts, so make sure you are reaching out to delinquent clients by phone as well as email and letter.
You have to know the complete details of the debt before getting started on collection. This will require telling the debtor the amount they owe, their original due date, and the services rendered.
It becomes helpful to do a little digging. This is just to find any obvious reasons for the bill not been paid yet. For instance, if your client is a small business owner and their business is having a “going out of business” sale, you might have a clue as to why the debt has not been paid.
This info collecting will also help you anticipate any reasons you may hear from the client as to why the debt has remained unpaid and think of solutions in advance so you are not caught off-guard.
If you have ever been on the receiving end of collection calls, you may be familiar with the “ignore and hope” method. You ignore them and hope they will eventually give up.
Unfortunately, that isn’t how large collection companies work. A small business owner though? Your client may be hoping that you will just give up on collecting the debt if they wait you out.
The key to successful commercial debt recovery is persistence. This doesn’t mean you have to be predatory or unethical. But it does mean keeping tabs on what is going on in terms of the repayment of your debt.
The Fair Debt Collection Practices Act has guidelines regarding debt collection. Familiarize yourself with them and make contact with your client as often as you are legally allowed to do so.
It’s so important to go into a commercial debt recovery effort ready to listen.
Your client may have very good reasons that they have not paid. A layoff, an unexpected medical issue, what have you. If you are willing to listen and find a solution that is mutually beneficial, you may find a client much more willing to cooperate.
Commercial debt recovery can be a tricky business, but it is doable, and even essential for the health of your business.