Sadly, Your Company Must Have a Collections Policy

By Nina Kaufman, Esq.

The first time it happened, I was shocked.  (Okay–naïve too, but shocked).  “What did I do wrong?” I wondered. “Wasn’t the client happy with the service I provided? After all, I swooped in, saved the day, and got them their pound of flesh. What’s going on?” It happened to me several times despite my best precautions.

It happens because we are basically trusting people.  I’ve had clients who paid my invoices like clockwork again and again suddenly disappear without paying their last bill.  Past performance, while an indicator of the future, is not a guarantee.  How can you minimize the chances that you’ll be cheated?  Here are a few suggestions:

You Have to Have a Plan

Expect to have past-due receivables and be prepared with a plan to recover your fee. Part of your plan involves setting out your terms in advance and inserting collection terms into your services contract.  While that still doesn’t guarantee payment, it makes your case easier to prove in court if it gets to that point.  Outside of your contract, your collections plan should include:

  1. An invoice schedule – The longer you wait to bill a client, the greater the chance they will question payment.  Invoice on a regular schedule and adhere to it.
  2. Persistent follow-up – For a small business owner, it’s hard to both sell to clients and collect from them.  You have to be tactful if you want to retain their business, but if they don’t pay what does it matter?  Be polite – until polite proves not to work.  But mostly, be persistent.
  3. Keep track of your receivables –Stay on top of your accounts. When you make those collection calls/emails, you need to accurately state the amount owed and how long it’s been overdue.

Tip:  The key to collecting those past due debts is to be consistent.  Have a plan; work your plan; and your plan will work.   

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