One of the most significant challenges that many business owners face today results in collecting money that is due to them for services rendered or goods purchased. Many businesses today offer a credit or financing system to clients or customers out of a desire to make it easier for them to pay monies owed to the company. While some will pay the money owed in a timely manner, others will fail to do so. When this happens, the business owner may have a few options available to collect outstanding money.
Work With the Customer
Some customers may have an honest desire to pay you the full amount owed, but they may be unable to manage the structure of their current debt. You may consider contacting the customer directly to determine if stretching out the payments over a longer period of time may help. Some customers may also respond well to demand letters and phone calls. With these letters and phone calls, you may consider the fact that you can tell them the next step is to turn the account over to a collections agency. Many will fear the possibility of being contacted by a debt collections firm, and they may begin to actively work with you to pay the debt off in full.
Settle the Debt
While restructuring the debt with a longer loan term or revised payments may be helpful for some, the fact is that some simply will not be able to repay the debt in full. When this is the case, you may consider settling the debt. This means that you agree to a reduced amount if a large payment is made within a specified period of time. For example, you may agree to waive $200 owed if the balance is paid in full within the next two weeks. Some customers may be more motivated to use credit cards, loans or personal favors from friends or family members when they are offered this option.
Work with a Business Collections Firm
When you are unable to collect the debt on your own, the final step is to work with a business collections firm. This is a firm that will pursue legal routes to obtain money that is owed to your firm. A collection agency will charge a fee for services rendered. Typically, this amount is a percentage of the amount of debt collected. While there is a fee for this service, the fact is that you may not collect any money owed to you from some customers if you do not work with an established and experienced collection agency.
When your company is unable to collect money owed, you may struggle financially. This is money that may be needed for payroll, to purchase new equipment or for other critical needs. You can follow each of these steps to collect the money that is owed to you, and you may find that you can increase your bottom line when you improve your ability to collect accounts receivable from clients.