How to Collect Debt Owed to Your Business
Since the recession is in a very long, slow recovery, we are all still facing circumstances that can be difficult. Many small business owners are dealing with the fallout from a shaky economy and its effects on everything from production to hiring (or lack thereof). One thing small businesses may now have to deal with, even if they never have before, is business debt collection. Since money is still tight for so many people, business owners may have to push for payments from clients or customers they never thought they would. Here are some basic ideas and resources to help with the questions around how to collect debt.
A first step in dealing with debts is to be careful and methodical with credit in general. It is a good idea for your business to extend credit only after a standard form has been completed. Next, collection should be consistent. A company procedure manual outlining steps for collection can be very helpful to employees. It is a good idea to approach debt collection in a measured manner before turning to collection agencies or the courts. Take a look at these samples of collection letters that can be sent to debtors.
If your efforts at collection still prove unsuccessful, you may have to turn to a debt collection agency. If you do, make sure that the agency is licensed and bonded. In addition, make sure the agency operates under the Fair Debt Collection Practices Act. You can check with your state's consumer protection agency or regional office of the Federal Trade Commission (FTC) to see if there have been any grievances filed against the agency.
If you have had to sue over the collection of your debt, you may still need to act further, even after a judgment in your favor. A worst case scenario may include providing information about the defendant to a law enforcement officer (often sheriff or marshal) so that they can assist you in collecting the debt.
If you are a contractor and need to collect on a debt for work on improvement to real estate, you may file for a lien against the property. If the debt remains unpaid, a contractor has the right to collect on the debt at any foreclosure sale of the property.
As with many other areas of business, initial planning and clear company policies will help you avoid problems in the future. If, despite your work, you need assistance with business debt collection, meeting with an expert in the area is always a good idea.
Related Resources:
- Debt Collection - Overview (FindLaw)
- Credit and Collections: Two Approaches (FindLaw)
- Creditors' Rights and Collection Options (FindLaw)
- The Rich Aren't That Different - They Have Repo Men Too (FindLaw's Legally Weird Blog)
- Commercial Law Info Ctr (provided by The Law Firm of Peters & Wasilefski)
- Debt Collector Harassment FAQ (provided by Baird Law Group)