1. Get it in Writing.
The first thing you need to do is get any agreement calling for payment in writing. It will be much easier to prove your point. Relying on some type of verbal agreement based on a hand shake generally will not work.
2. Secure Your Payment.
See if there is a way for you to secure your rights. Whether it’s a construction lien on real property, a UCC on materials, or even a guaranty from an individual, it’s always helpful to have something else to fall back on if you’re not paid.
3. Bill Regularly.
The worst thing that you can do is send bills sporadically. Your customers need to know you’re serious about getting paid and they can set their watches on the bills that they receive from you.
4. Cap the Credit You Provide.
To the extent you can limit your exposure by limiting the credit you give, you should do that. It’s much easier to suffer a loss of $5,000 than $50,000. You need to make credit decisions based on the credit risk of the customer, and adhere to that limitation as you continue to do business with that customer.
5. Contact Delinquent Accounts Often.
Do the obvious – contact the account holder. Do it verbally and in writing, nicely and firmly but do it, and do it often. Remember, the squeaky wheel generally gets the grease.
6. Resolve Disputes Quickly and in Writing.
Sometimes your customers will tell you that the goods arrived late or that they are unhappy with your service. Try to resolve these issues yourself. Better to give a small credit in exchange for a prompt payment, and move on.
7. Negotiate with Actual Decision Makers.
Whenever you’re negotiating payment of a delinquent debt, make sure you’re negotiating with someone that has the authority to make decisions. Avoid the frustration of negotiating with someone who has no real authority. Deal with someone who can actually move the ball forward.
8. Condition any Reduction on Prompt Payment.
After you decide that you’re going to provide a reduction in what is owed, be sure to require an immediate payment. Make sure that that condition is expressly set out in a written agreement (can be an email or text). The last thing you want is to give a credit and then keep waiting on a promised payment.
9. Don’t Delay in Initiating the Legal Process.
Once you determine that there’s nothing more you can do yourself, don’t wait to enforce your legal rights. Get to your lawyer ASAP. Every day that goes by makes it that much harder to collect the debt.
10. Avoid Emotional Decision Making.
Leave your emotions at the door when you deal with collection issues; it makes resolving a business dispute much easier.
Employ these 10 debt collection strategies and you will likely see your cash flow increase and your frustration level decrease.