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Start collecting past-due accounts today with InstiCollect

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Bring balance to your small business debt collection efforts

small-business-debt-collection-IC System

In small business debt collection, the golden rule to motivating late customers to get current with their payments is persistence. Phone calls and reminder notices should be a part of every small business’s billing procedures, even if it’s not time yet to turn over the accounts to a collection partner. It’s important to bring balance to the approach. Being the “too nice” business owner can cost you more in the long run. And overly aggressive collection tactics are a sure way to turn off customers. Here are three things every small-business owner should know when creating their in-house past-due policy.

1. Look to federal law as your guide
When you write your game plan to pursue late payments, the best place to start is the federal Fair Debt Collection Practices Act (FDCPA) of 1977. It’s not necessarily because you would automatically fall under federal review if you make one mistake. In fact, the federal agency that took over its enforcement in 2013, the Consumer Financial Protection Bureau (CFPB), tends to focus its efforts on collection agencies with more than $10 million in revenue.

But the FDCPA lays out what we would consider common courtesies when dealing with these customers, things like not calling at odd hours or outing someone’s debt status to other family members and employers.

2. Prioritize your debts
If you supervise employees or even have children of your own, you have probably already figured out there’s no one-size-fits-all response to mistakes. Some self-correct, others need a whispered reminder, while others still need direct intervention. Bring this mindset to managing your late accounts and bring the right response to the right customer.

Ideally, you’d set up your triage system based on the results of a credit check. If that’s cost-prohibitive, what you can do is set up your billing system so you can easily sort them out based on payment history. Those with a long history of early payments will likely self-correct when the next month’s bill goes out. The one who hasn’t been around for long or has a record of being tardy may need a friendly phone call. This simple elimination process frees up time and energy to focus on more serious cases.

3. Be clear and straightforward every step of the way
We’ve come across many small-business owners who try different sleight-of-hand tactics to motivate their customers to pay. Some may present a faux shingle for a collections department. That is, Tim’s Stationary & Office Supplies may mail past-due notices from TSOS Collections, in hopes the threat of tarnished credit will give late customers incentive to hurry up and pay. This can backfire for several reasons. If the customer ends up filing a complaint about your tactics, that could trigger a response because you’re presenting yourself as a collection firm. It doesn’t pay to cut corners. When your attempts to collect fail, it’s time to work with a collections partner.

About the Author:

Brian Eggert is a business development specialist and writer for IC System, one of the largest receivables management companies in the United States. With 18 years in the collection industry, Brian's experience includes operations, client service, proposal writing, blogging, content creation, and web development.