Collecting On Your Customers Debts

What happens when you have customers that get behind on their payments? When people are not paying you, it causes you to end up dealing with cash flow shortages as your money is being used to sustain the business. You need to be able to come up with an effective way to get your customers to pay you so you are not forced to dip into your cash reserves. Customers that owe you money can make it difficult for you to pay your suppliers and others as you are stuck borrowing money to pay them. So what are your options? Let's look at a few of the things that you can do.

Update Your Payment Policy
Your goal is to get people to pay you ahead of time. You should start asking people to pay at least 50% of their order at the time it is sold. Then you can give them a time frame as to when they have to pay back the rest of the money or they will end up with interest fees and other charges. Set up an automatic payment plan as this can easily force people to pay each month. Make it hard on your customers that do not pay and do not accept any future orders from them until they pay off the balance of what they owe you. When you get them to pay you ahead of time it will make it a lot easier on you to purchase your products and services from vendors and it really does help you to get people on your side to pay on time.

Phone Calls and Letters
Before you take your customers to small claims courts and work with debt collection agencies, you should do all that you can to really collect on the debt right away. You should start out with phone calls and letters to remind your customers what they need to do in order to settle their debts. When you get them on the phone, don't let them hang up without getting a credit card. If you don't get the payment by the time the customer promises, follow up with another phone call and then you need to consider sending out a letter that discusses that interest rate and the possibility that you may end up moving their account to a debt settlement company or even taking them to small claims court. Try your hardest to get them enrolled in a payment plan so they can avoid these issues but let them know that they will still have interest charged on the account if they will not pay off the full amount that they owe.

Debt Settlement Company
To help you in forcing the customers to pay, send their account to a debt settlement company or collection agency. They will take over the account and will get the customers to pay. This is nice as you won't need to deal with all the harassing phone calls, which can often be out of your field of expertise. The other nice thing is that the debt settlement company will end up moving them to collections where it can hurt their credit rating. This is a process that can be difficult for many small businesses to deal with so you should leave it up to the professional companies that have more experience with it.

Small Claims Court
One option you do have is to take your customers to small claims court. Consider the cost of it so you can justify if it is worth it or not. You need to be able to see the cost and to determine if it will force your customers to pay or not. The small claims court is usually easy to use and most people will pay quickly. You will need to pay at least $40 in order to file the paperwork.