Collection of Accounts Checklist
Created by FindLaw's team of legal writers and editors | Last reviewed November 23, 2016
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If you extend credit to your customers, it's inevitable that some of those customers are not going to pay you on time. In fact, you can rest assured that some of those customers are not going to pay you at all. What can you do when a customer doesn't pay?
There are a number of important steps you can take including sending a demand letter, visiting the customer in person (if feasible), or hiring a lawyer. There are also collection agencies that are available to assist you in the collections process.
A Word on Collection Agencies
If you do turn your account over to a collection agency, be sure you do your homework first. Make sure the agency is licensed, bonded and follows the rules of the Fair Debt Collection Practices Act. Anything less can not only ruin your reputation in the community, it can have negative legal consequences if the agency engages in unfair collection practices.
How to Collect on a Past Due Account
The following actions can help improve your chances of collecting your accounts.
- Require payment by cash or credit card whenever possible.
- Encourage customers to pay sooner by offering discounts for payment within a specific period of time. For example, you could offer a 2 percent discount if an account is paid within ten days rather than thirty.
- Discourage customers from paying late by charging interest or late fees on delinquent accounts. Be sure to consult with your attorney first to be sure you are complying with your state's usury statutes and applicable federal laws.
- Make a personal visit to your customer to discuss a past-due bill, or talk to your customer when he or she visits your business, whenever possible.
- Make a phone call to your customer about the past-due bill in cases where a personal visit is not possible.
- Send a series of "reminder" letters to your customer if talking to him or her personally is impractical, or if the amount owed is relatively small. The first letter can simply be a friendly reminder. The second letter can be a little more forceful. The third letter can be a "final" demand before you turn the account over to a collection agency or to your attorney.
- Use a collection agency to collect a past-due account if trying to collect the account is too time consuming or if you have not been successful in collecting it. A collection agency usually charges a significant percentage of the amount of the debt as its fee.
- File suit in small claims (conciliation) court if the dollar amount of the past due account is under the maximum amount allowed for such claims.
If the amount owed by your customer is more than the amount allowed by your local small claims or conciliation court, ask your attorney to file a lawsuit to collect the account.
Consulting with a Legal Expert
When it comes to debt collection, most of us aren't experts. But a qualified business and commercial law attorney can be a great resource for you, especially if you need to file a lawsuit. Contact an attorney in your area today.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
Contact a qualified business attorney to help you address the finances vital to your business.