When a Debt Goes Bad
by Wendy Priesnitz

Q: Could you please advise with regard to a home business collecting money from customers of my small, home-based business? It's not a pleasant job but perhaps you could provide some tips or dialogue that would make this task a little simpler and smoother.

A: There are no magic bullets or silver-tongued dialogue that will make customers pay their bills if they are unwilling or unable...no matter how big or small your business is. Prevention is a better strategy, but once the non-payment monster has raised its ugly head, persistence pays off more than anything else. 

In terms of prevention, make sure you have a credit policy. Establish ground rules for how payment must be made and stick to them. Spell them out on your order form, contract, brochure and website. And don't forget that credit is a privilege and you don't have to grant it unless you're totally comfortable with your customers intentions and financial situation. To this end, draw up a credit application, have new clients fill it in, then follow up.

Consider asking for payment up front, at least until credit is established. Or on a contracted service, require monthly or phased payments, which allows you to cut your losses by stopping work until payment is received. Have the client initial this clause in your contract. 

Don't let things get out of hand. Avoid allowing accounts to age past one outstanding invoice. Customers with chronically aging credit histories can be put on a COD or credit card only payment basis. But don't tell them until after they've paid what they already owe you.

When collecting a small business debt, always make personal contact. Call regularly and often; don't be afraid of making a pest of yourself - that is exactly what you want to be! Be firm but don't get belligerent. It is often helpful to present options...post-dated checks, debiting their credit card a certain amount each month, and so on. 

If that doesn't work, send a registered letter to let them know you mean business. Give them a payment deadline, after which time you will turn their account over to a lawyer or a collection agency, or take them to small claims court.

Do not threaten those measures unless you are willing to follow through. And you should be. Word travels and being an easy touch is not a reputation you want to cultivate.

So remember that persistence pays, whether you're selling your product or service, or collecting debts for your home business. And don't be so eager for business that you ignore the fact that not all clients are desirable clients. Some may actually end up costing you money if you are not careful.


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