Five Rules for Collecting Late PaymentsBy Nina Kaufman, Esq.
Let’s face it: Once you’re headed to the courthouse to collect a bad debt, you’ve lost. Lost, because you rarely, if ever, get 100 cents on the dollar. Lost, because you lost time and energy dealing with the situation. Lost, because you had a client who likely will never return.
As Monica Mehta writes in Businessweek, business bankruptcies are nearing a 16-year high. So now there’s even more incentive not to get caught short with a slow payer, because you may get nothing in the end.
My colleague, collections attorney Jocelyn Nager, is a staunch advocate of having a credit and collections policy for your business. Not only does it eliminate guesswork when this uncomfortable situation arises, but also, as she points out in Mehta’s article, “[it’s] your best defense against bad debt.”
Have you done what you can to have clear payment terms and get credit details in advance? Mehta suggests that small businesses implement the following steps:
- Initiate direct contact after a payment deadline is missed.
- Take broken promises seriously.
- Contemplate hiring a collections agency or attorney.
- Review your legal options.
- Create a credit policy (to avoid having to go through steps 1 through 4).