• Getting Paid On Accounts:  Advice for Small Business Owners
  • November 11, 2013 | Author: Justin Knappick
  • Law Firm: Dressman Benzinger LaVelle psc - Crestview Hills Office
  • In today's economy, small businesses are increasingly focused on their bottom line.  However, there is one aspect of a small business's bottom line that is often overlooked until it's too late:  how to make sure it gets paid. With a little preparation, small businesses can minimize past due accounts and develop appropriate mechanisms to collect problem accounts.

    First, ensure that each transaction is appropriately documented.  Ideally, each transaction should be embodied in a written agreement that contains a complete record of the account, and, depending on the circumstances, provides the creditor certain protections and releases.  Additionally, before extending credit, obtain as much information about the customer as possible.  This information could greatly assist recovery in the event the customer defaults on the obligation.

    Second, once the account is properly documented, get creative regarding payment.  Accept payment as early in the process as possible and offer discounts for payments in full when dealing with slow paying customers.  If an account is not paid upfront, offer customers a variety of payment options and accept payment plans or alternative arrangements.  Further, if payment is not received, follow-up with an account statement to ensure the customer is aware of the available options.  Accounts should not remain outstanding and unpaid for an extended period of time as stagnation can hinder the ability to collect.

    If payment is still not received, issue a demand letter.  Demand letters should clearly convey to the recipient the balance due and that payment is required within a specified timeframe.  Each successive demand letter should increase in intensity.  However, demand letters should never mislead or harass the customer for payment.  Demand letters should be truthful and should clearly provide all necessary information to allow the debtor to make payment.  If necessary, consult an attorney to prepare form demand letters to be sent on delinquent accounts.

    Finally, if the customer continues to refuse to make payment, consider turning the account over to a collection law firm.  Collection law firms will often take a percentage of any money collected, negating the extra expense of attorney's fees.  If the appropriate information is obtained early in the process, collection firms are often equipped and uniquely experienced to evaluate the possibility of successful collection of the account.  A collection law firm will enable you to obtain judgment against the debtor in court, often including payment for not just the principal balance but also court costs accrued and interest.  Once entered, a judgment will allow you to proceed against the debtor's assets, including real estate, bank accounts, and wages.  Care should be taken to hire a reputable collection firm to ensure the greatest chance of collecting the account.

    Taking the appropriate steps from the outset to ensure that payment is received is an easy way to increase revenue and improve a small business's bottom line.  Moreover, getting creative and understanding a debtor's circumstances can not only generate receipts in a timely manner, but can also improve a business's reputation.