How to Collect Business Debts

Posted in Sales, Strategy, Tips

You’ve sold an item or performed a service. The customer promised to pay. Now, the time for payment has arrived and you are left empty-handed.

Getting ripped off is never fun. Yet, it is an experience that many small business owners have had at least once (and probably more). If this happens to you, how can you go about getting paid for your product or services?

Begin Collecting ASAP

The longer a debt is outstanding, the less likely it is to be paid. With this in mind, begin the collections process as soon as possible after the bill becomes delinquent.

Directly Contact the Debtor

Begin with a phone call to the debtor. He or she may have simply forgotten to pay or may have a legitimate reason for lateness. If you are unable to get a satisfactory response from the customer, make repeated calls, but don’t call more than once per day. Be sure to keep notes of your conversations, as well.

If your first few calls do not work, send letters to the customer. Each letter should escalate in intensity. For example, the first letter may be a notification that the bill is past-due and each letter after can become more serious, letting the customer know what actions you may take if the issue lingers on.

When contacting the customer directly, be sure not to include threats or derogatory comments. This may be construed as harassment and is unprofessional in nature.

Offer a One-Time Reduction

If you have doubts about being paid the full amount, consider striking a deal with the debtor. Offer a one-time deal for a lower amount. Be sure to put this in writing and get the agreed-upon amount in full.

Hire a Collections Agency

If your personal efforts to collect the debt have not gone as planned, hire a collections agency. Check with fellow business owners and on the Internet for a qualified collections agency that can improve your chances of getting paid.

A collections agency will typically offer you 50 percent of what they collect. It’s not an ideal situation, but you may recover some of the debt instead of walking away empty-handed.

Pursue Legal Action

If all else fails, pursue legal action. Take the issue to small claims court. Bring any supporting documentation and/or witnesses with you and have your case heard.

If you lose your case, you can file an appeal. If you win, then the debtor can either pay you voluntarily or the court can enforce payment through a lien on the debtor’s property, wage garnishments or other actions.


At each step in this process, consider the costs and benefits of continuing. For example, if you are owed $10,000, it may be worthwhile to take the time and effort along with any expenses of collecting the debt. However, if a debtor owes you $50, you may wish to just cease further business with this customer.

Always abide by the Fair Debt Collections Practices Act when dealing with consumer debtors. This is a Federal law that governs debt collections.

Whatever the case may be, you’ll improve your chances of collecting debts by following the recommended actions. Take note of what works for you and develop your own collections procedure as you go along. Give it a shot and recover as much of your hard-earned revenue as possible.

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