If life was perfect and people paid their bills on time, there would be no need for nuisances like collection letters, litigation and garnishments. Unfortunately, however, life is not always ideal, and people do not consistently meet their financial commitments.
That’s why it is imperative for small business owners to equip themselves with methods for collecting money owed their enterprise.
According to Lindsey O’Brien, marketing brand manager with Cleveland, Ohio’s E2B Teknologies, the creator of collection software Anytime Collect, says there are steps an entrepreneur can take when seeking past-due payments.
Before entering into a contractual agreement with a vendor, especially one new to your company, O’Brien suggests checking that business’s credit history “to see if they have fallen behind with other creditors.” Assuming the vendor passes that initial test, she says it is wise to enter into a written and signed contract journalizing the agreement of involved parties.
Just like people can purchase insurance against losses stemming from fire and theft, a small business owner seeking protection from non- or late-paying vendors can buy trade credit insurance.
When a transaction has reached the point where payment is not only due, but is late, steps an entrepreneur can take include:
Initiating pleasant phone calls reminding vendors/debtors about the debt
Sending payment reminders
Sending collection emails
O’Brien suggests business owners sending any type of collection-related communication to debtors familiarize themselves with the Fair Debt Collection Practices Act (FDCPA) to ensure their collection efforts don’t violate state or federal laws.
She says certain information should be included in a payment request, such as:
A statement indicating when the payment was actually due
A brief summary of prior collection efforts
An accurate mailing address where payments are to be sent
If sending respectful communications requesting payment doesn’t get the job done, O’Brien suggests hiring an attorney to send a few collection letters. When a third-party, such as a lawyer or collection agency, gets involved in a collection matter. The FDCPA kicks in when a third-party collector gets involved, and entrepreneurs should be certain the lawyer they hire to collect a debt is familiar with those statutory provisions.
Tami Kamin Meyer is an Ohio attorney and writer who is also chair of the Marketing Committee of the American Society of Journalists and Authors.