How to collect money from a customer who didn’t pay her bill?

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

An award-winning small business attorney in New York City, Nina is a sought-after professional speaker and Entrepreneur Magazine online contributor. She is the go-to counsel for knowledge economy and creative companies, delivering legal services and educational resources that save them time, money, and aggravation.

Posted on February 2, 2015 in Business Transactions

Q.:  I own a small hair salon. A customer recently received services, then said she forgot her wallet and would return later in the day with her payment. She never came back. She has done business with us before but is not a regular customer. What are my steps on how to collect money from her, and what rules, restrictions and deadlines should I be aware of?

A.:  Good luck.  Usually, entrepreneurs learn how to collect money the hard way—someone stiffed them. Hopefully, you have a name, address, and telephone number for this person, or can locate it.  Send a written invoice for services rendered.  If she fails to pay it, you might try to turn it over to a collection agency—the experts in how to collect money.

Why couldn’t you do it yourself?  If you’re not experienced in how to collect money, collection of delinquent debts is subject to the Fair Debt Collection Practices Act, and you can find yourself on the wrong side of the Federal Trade Commission (or not entitled to collect) if you don’t follow the proper procedures.  Be aware, though, that collection agencies may take as much as 40% of what they collect on your behalf, depending on the amount collected.  If you don’t have her address or telephone information, you’re probably out of luck.  Call it the payment of tuition to the School of Hard Knocks.

But learn from it.  As outlined in my legal guide on making clients pay, consider putting a procedure in place where people can’t leave your salon without countersigning an invoice (and providing all their contact information) that allows for interest charges and attorney’s fees if you have to collect your money.  Post a sign at your front desk that politely reminds people that “payment is due at the time of service.”

Here are more law questions about handling business customers and how to collect money.

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