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What to do when customers won't pay what is owed

Do you have customers who won't pay what they owe you?Do you have problems collecting on accounts that are past due?Here are some guidelines that can help you know how you can deal with those unfortunate incidents when your customers don't quite live up to their agreements and they won't pay you what they owe to you and to your company.

1.Protect yourself before you even run into problems

The first place where you should start when it comes to problems with customers is before they even become customers.It has become common to run credit checks on new customers, so you shouldn't feel awkward about asking potential customers to fill out a formal credit report.Also, you should make all of your payment requirements, your prices, any extra fees, and due dates absolutely clear with any new customers so that everyone is on the same page in terms of payment.

You should also make sure that all of the lists of fees, services, due dates, and charges are put out in writing.Give the customer a copy of the contract and keep a copy for yourself.Include in the contract a section that clearly outlines ramifications and steps that will be taken of payments are not made on time.You might choose to have a grace period.Make this perfectly clear.If you are going to charge money on a specific basis as accounts continue to go unpaid, make this clear.

Send out bills routinely and on schedule.Mark invoices clearly as invoices and not just a mailing that can be tossed.

2.The first thing to do after an account due date passes

After a customer has passed the stated time frame in the contract-10 days past due, for example-send out a reminder notice.Don't wait to send the notice out!The longer you wait the less chance you will have of retrieving the money that is owed.Send out a couple of notices, and send them out promptly.

If the customer does not send in payment, call the customer.Politely remind the customer that the payment is past due.If there is a reason why payment has not been made, perhaps you can work out a payment agreement with the customer.This call should be made by your accounts receivable department, or your secretary or another party.

3.What to do if initial attempts are not successful

If a customer still does not pay after you have made a polite phone call or two, then it is probably time for you to contact a third party agent.The most common third party agent for retrieving payment due is third party collection agencies.These collection agencies generally charge a commission on money collected.Some collection agencies charge a flat monthly fee, also.Contact the Better Business Bureau before you contract with a collection agency to ensure that the business is in good standing.

If the amount of money owed is significant, then you should contact a lawyer.

If you feel that it is appropriate, and you do not intend on keeping this customer, then you might want to consider filing a claim in small claims court.

4.What you should not do with customers who won't pay

There are several things that you should not do when customers do not pay.You should not spread the information around.You also should not harass the customer.You cannot threaten the customer, you cannot threaten the customer, and you cannot abuse the customer by making too frequent phone calls and showing up at all hours.This behavior can get you in trouble with the law.This approach also will probably not be successful.

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