Debt Collection in Florida – When Customers Won’t Pay
Tuesday, August 21st, 2018 | The Cash Flow Group | Comments Off on Debt Collection in Florida – When Customers Won’t Pay
Slow-to-pay and no-pay customers can be a real headache for small business owners.
Those outstanding invoices often create havoc with a small business’ cash flow and can bring operations to a grinding halt- especially if the company is working on tight profit margins. But collecting on outstanding consumer debt does not have to begin with a bottle of aspirin.
Here are a few strategies to help small business owners get the most money from those outstanding invoices:
Be assertive, yet sensible with collection efforts: Trying to collect on overdue accounts is a delicate balance. On one hand, a business can often ill afford to be lax with collection calls and demand for payment letters. On the other hand, to keep loyal customers business owners should also take into consideration any external circumstances, such as economic conditions, that may affect a customer’s short-term ability to pay and make adjustments to the credit policy where it is feasible. Moreover, when deciding how to collect on an overdue account, a business owner should weigh the cost (in terms of money and other resources) of any collection efforts versus the actual amount that can be recovered.
Develop a credit policy: Business owners should make sure to clearly outline the terms and conditions customers must fulfill to establish credit with the company as well as the actions that will be taken when accounts are overdue. This policy should be made available to customers and can be submitted with any invoices on overdue accounts so that these customers know what to expect.
Don’t stop the communication: Once the communication stops between the business and the indebted customer, the likelihood that the business will receive even some if its money is much less. All communication should be firm, yet clear and respectful.
Know what action to take and when: Business owners should be familiar with the different options available for collecting on outstanding invoices or reducing the loss.
Keep good records: Along with a credit policy, businesses need to maintain clear, accurate, and up-to-date credit files and payment histories on each of their customers. There are numerous accounting software suites, such as those offered by Quickbooks, Peachtree, MYOB, and Microsoft Office and even some decent free, open source options, such as GnuCash and NolaPro, that can help small business owners stay on top of their accounts receivables.
– Send the invoice to a factoring company. If the outstanding account fulfills certain requirements, it can be given over to a factoring company. With accounts receivables factoring, the business will receive a significant percentage of the amount owed on the invoice up front from the factoring company and also be able to hand over the collection process.
– Find a good collection agency. For a fee, small business owners can enlist the expertise and services of a collection agency to nudge customers into paying on the account.
– Take the customer to small claims court. Though going to small claims court may not be such an attractive or even worthwhile option, there may be certain situations that warrant this course of action. A business owner, for example, may want to begin the process in order to influence a customer into reaching some kind of settlement.
– Claim the loss for a tax deduction. According to the Tax Code IRC 166, Reg. 1.166, business owners may be able to claim part of the loss on their subsequent tax return.
In short, with a little effort, know-how, and sensibility, small business owners can significantly improve their chances of collecting on outstanding invoices, and keep their heads clear for more important matters, such as running their business.
Please call our collection agency at (800) 226-2006 today with any questions or concerns.