Saturday, November 08, 2008
How To Collect Debts
I am very bad at asking for money and collecting my debts so I researched the best techniques:
Send an Invoice. For their convenience, you have included a self-addressed stamped envelope for their payment. Make it as easy as possible for them to pay.
Send Follow-ups. Clients may not respond to your first invoice letter. Most companies send several, with increasing urgency in tone.
Visit or Call. Either in place of or after written contact, a more personal approach is to contact the client in person. Place a phone call, tell them that you hate to inconvenience them but you are balancing your books and need to get all payments in. Or, if your debtor is a businessperson as well, go to their place of business and ask to speak with them. Once in private, casually ask if they ever sent payment.
Send a Third Party. One of the most common approaches, good cop/bad cop can work just as well in bill collecting as on Law & Order. If your other efforts have failed, try to have a third party (i.e. secretary, accounting department, assistant, co-worker, etc.) make contact.
Add New Charges to the Old Bill.
Assess Late Fees. It may seem a little counterintuitive to ask people who can't seem to pay their bills to pay even more. But mounting penalty charges can be a powerful incentive to pay off debt before more is incurred. Just be sure to tell all clients ahead of time that late fees may apply if they don't pay their bills on time.
Hire a Collection Agency. Professionals from doctors, retailers, and mail-order companies rely on them. Much like lawyers, collection agencies take a percentage of the amount owed once it has been collected. Before you wash your hands of debt collecting forever, be aware that agencies often use severe tactics such as obtaining court orders requiring forfeiture of the debtor's wages, and/or reporting the offendor to the credit bureau, which could affect the debtor's credit record for years.
Go to Small Claims Court. If you have only one or two minor accounts in default, you might not want to go through the hassle of dealing with a collection agency.