How to collect small business debt

How to collect small business debt

Few things are more frustrating than dealing with a client who won’t pay for products or services that you provided. And while you may want to head over to their home or office with a sock full of pennies, it’s best that you take a legal and calculated approach.

Understanding Small Business Debt Collection

At some point, every company will encounter a situation where a client doesn’t pay on time, refuses to pay altogether, or can’t afford to pay the full amount for services rendered. While each of these situations is notably frustrating, it’s important that you respond in the appropriate manner. How you respond will not only impact your chances of collecting on the debt, but it’ll also reflect on your brand image.

  • Customers who will go to any lengths necessary to avoid paying.
  • Customers who have lots of payments due at once and pay them off sporadically.
  • Customers who normally pay on time, but can’t because of financial issues.

“In general, you will want to ensure that your clients and customers fall into the last two categories,” FindLaw.com explains. “You will be able to manage and work with those that fall into the last two categories because they have a history of making full or partial payments. As a small business owner, however, you need to be able to devise a strategy and method for figuring out which clients and customers fall into the first category.”

It’s also important to recognize that not all debts and delinquent payments are the same. For example, a $250 debt from a long-time client who has never missed a payment is not equal to a $15,000 debt from a new client who has yet to pay you for any services rendered. You can’t take a narrow approach to debt collection. Everything happens on a per-case basis and you must be willing to adapt to the circumstances.

6 Tips for Getting Your Clients to Pay Up

It doesn’t matter if the client is someone you know personally and have a great relationship with or a brand new client that you’re angry with — you have an obligation and a right to collect the money you’re owed. The key is to be strategic in how you approach these situations.

1. Stay Calm

When you’ve provided services for a client and they don’t pay you on time, your natural inclination is to be infuriated (and you have a right to be upset). But it’s imperative that you take a deep breath and stay calm. The angrier you get, the less likely that you’ll collect on the full debt. The client will feel your wrath, will take it personally, and won’t feel like cooperating (at least not in at timely manner).

“Your mental state has a strong impact both on how you handle the debtor and how they respond to you,” collections expert Bob Tharnish says. “Treat each call as if it was your first call of a very good day. Put a smile on your face. If you were irritated on the previous call, take a few minutes to calm yourself and start afresh. The debtor will respond to your tone. Your upbeat mood will be contagious and you are likely to get a more positive response from the debtor.”

2. Know Your Rights

If you don’t have any professional training in accounts receivable or debt collection, then you’re probably blindly fumbling your way through the process of collecting payments. The sooner you educate yourself on your rights and legal options, the better off you’ll be. Not only will you understand the actions that can and can’t be taken, but you’ll also become more confident in your interactions with customers.

For example, did you know that you can legally search for someone’s social security number if that individual is evading your debt collection efforts? While there’s no free online lookup service, you can go through the legal steps to find someone’s social security number so that you can move things along.

3. Document Everything

Few things are as important as documentation in a small business debt collection situation. Should the debt ever lead to a legal battle in court, your ability to point to documentation will be very helpful.

Every time you talk to a client on the phone, record the phone call and take notes. Certify and copy every letter you send in the mail. Save email correspondence. Log visits you make to the client’s office or home. All of this information could prove helpful.

4. Avoid Harassing

There’s nothing helpful about harassing a customer who owes you money. While persistence plays an important role in collecting on a debt, there’s a fine line between checking in and pestering.

Harassing looks like calling a customer every single morning for 60 straight days and screaming at them. Persistence looks like calling every seven to ten days and giving the client some options by which they can start paying off the debt.

5. Offer to Settle for Less

Let’s say a client owes you $10,000 and is 120 days past due. You’ve been trying to collect on this debt for four months and feel pretty sure you’re never going to see the money. Before simply writing the debt off, it’s always a good idea to offer a settlement for less than you’re owed.

While the delinquent payment is stressful to you, rest assured that it’s causing more anxiety for the client. It’s probably keeping them up at night. If you come to them and say you’re willing to take $5,000, they may jump at the chance to get it off their books. And considering that you already counted it as a lost cause, that’s a $5,000 win for you. You’ll never know until you ask!

6. Hire a Collection Agency

If you have a lot of outstanding debt owed to you and you’re spending a lot of time trying to collect on it, it may be worth your time to hire a collection agency. Not only will this save you time and possibly allow for better results, but it could keep you out of legal trouble.

“The Fair Debt Collection Practices Act (FDCPA) became law in 1977, and it governs how debts may be collected,” explains Mike Periu, president of Proximo, LLC. “The law mainly regulates companies that are engaged in the business of collecting debts on behalf of clients or that buy debt at a discount price with the goal of collecting on it.”

Registered debt collection agencies understand the intricacies of the FDCPA and you can avoid putting yourself in a compromising position by working with them.

Learn How to Walk the Line

Debt collection isn’t fun. Sometimes you feel like you’re being a pushover and other times you feel as if you’re being too harsh. The goal should be to walk the line well enough that people take you seriously and pay up when they’re able. You’ll occasionally have to write off bad debt, but follow the aforementioned tips and you’ll have some success.

How to collect small business debt

Getting customers to pay is one of the most difficult tasks for a small business, but also one of the most important. If you can’t collect from customers, you may not have enough money to stay in business. As an option, you may want to consider outsourcing your collections to a debt collection agency.

This article discusses how collection agencies operate, what to ask before you hire one, and some tips for selecting the best one for your business.

What Is a Debt Collection Agency?

Debt collection agencies are a type of debt collector. They are for-profit businesses that specialize in collecting unpaid debts.

Collection agencies must be licensed by most U.S. states and some cities, and each state has its own requirements. Some states require collection agencies to get a bond or a certificate of authority (registration to do business in that state).

How Collection Agencies Work

The most common way these collection agents work is for the business to turn over the names and information of the debtors to the agency. The agency then attempts to collect the debt and gives back the amount collected to the company, less their fee.

Most collection agencies work on a contingency fee basis, meaning that they receive a percentage of the amount they collect. This payment method gives them an incentive to collect because no collection means no money for either the business or the collection agency.

Sometimes collection agencies will negotiate with debtors to accept a lower fee. Since your business still owns the debt, you can accept the lower fee or take it back and continue to work on it if the collection agency fails.

Debt Collection Regulations

The federal government regulates debt collectors through the Fair Debt Collection Practices Act (FDCPA) for personal debts. However, the FDCPA doesn't regulate collections for business debts.

These regulations apply to anyone attempting to collect a debt, including collection agencies, your employees working on collections, and you as a small business owner.

If your customers are businesses, debt collectors aren't limited in what they can do to collect a debt owed by a business. This doesn't mean they can use illegal practices like threats and fraud.

If your customers aren't businesses, and the debt is for personal, family, or household purposes, the FDCPA regulations apply. A bill collector cannot:

  • Call before 8 a.m. or after 9 p.m.
  • Call at work
  • Harass, oppress, or abuse someone
  • Lie or make false statements
  • Use unfair practices
  • Conceal identity
  • Disregard a written request to cease contact

If the debtor is represented by an attorney, the collector must stop direct contact and only work through the attorney.

Alternatives To Hiring a Collection Agency

You have several other options for collecting on debts owed to you by customers. You may also decide to use one or more of these alternatives, depending on the individual circumstances of each debtor.

Collecting on Your Own

Some people will pay only if you push them, and others just won’t pay–ever. Your job as a business owner is to set up good procedures so you can collect money from customers yourself. Having a collections management system that you run yourself will get you money faster and easier, and at low expense. Be sure to brush up on the laws relating to collections to protect yourself.

Going to Small Claims Court

Small claims court is a possible way to get people to pay if the debt amount is small and the debtor is local. The process is simple and inexpensive. If you have the documentation that the work was done or the product was delivered, you have a good chance of getting the court to agree. Then you must persuade the court to give you a judgment (a court order) so you can get paid.

Selling the Debt

Accounts receivable factors are businesses that buy debt outright. In this case, you have no control over how the factor collects on the debt. Usually, this works best when you have many receivables and you need money quickly. The cost is based on a percentage of the total amount collectible based on the value of each individual debt (how difficult it will be to collect).

Hiring an Attorney

You could consider hiring an attorney to collect a specific debt. But they may not take the case if the collection agency hasn’t been successful. Attorneys charge high fees, but a letter from an attorney can provide a boost to a debtor.

How To Choose a Collection Agency

To find a collection agency, you can search locally or look online. You want a company that's a good fit with your business and has good ethical collections practices.

Check with your state's office of financial regulation or consumer affairs office to see if collection agencies must be licensed. Then check to make sure agencies you are considering have licenses. If an unlicensed collection agency harasses your customers, you could be liable if the customer sues.

Some tips for researching collection agencies:

  • Ask how the agency tracks and finds debtors.
  • Ask them to show you a typical script they use.
  • Check the reviews online for local agencies.
  • Check the company’s Better Business Bureau record and rating.
  • Look at Consumer Affairs (a private company that rates collection agencies).
  • Contact your state’s attorney general to check on state laws and lawsuits against this agency
  • The Consumer Financial Protection Bureau administers the FDCPA and it takes complaints. You might be able to check on complaints against an agency you are considering.

Frequently Asked Questions

How much does it cost to hire a collection agency?

Collection agencies charge fees based on how difficult it is to collect. Their fees are usually calculated as a percentage of the amount collected. Fees based on the size of the debt can be from 50% for larger debts to 10% for smaller ones. It's more difficult to collect debts the longer they are overdue, so the collection agency may charge you up to 50% for debts that haven't been paid in a year or two.

What are the benefits of using a collection agency?

Collection agencies are a good alternative in several situations:

  • When you can't find a customer
  • If the person's debt is larger than your state's limit for taking a debtor to small claims court
  • When you have several hard-to-collect debts
  • If you know you don't want to have any dealings with this customer again

But you may not want to use a collection agency if you need to have a continuing relationship with this customer, because they may stop doing business with you if you send a "bill collector" after them.

How to Ensure You Get Paid When a Customer Misses a Payment

How to collect small business debt

Alexskopje/iStock/Getty Images Plus

Hate collecting your money? Join the club. Recent OPEN Small Business Network Polls from American Express shows accounts receivables is the top cash flow concern of small business owners. To ensure that you get paid, use the following debt collection tips and best practices.

Take a Positive Stance

Don't take it personally if your customers aren't paying their bills on time. Look into why the bill is late. It could be your client simply forgot. To help avoid these types of missed payments, provide a gentle reminder immediately following the invoice due date.

Increase Directness Gradually

One of the secrets of small business debt collection is to gradually increase the assertiveness of your follow up communication over time. Your first call, letter, or email should give your customer the benefit of the doubt with a positive and helpful tone. But by the third collection letter or correspondence, the tone may be more direct and assertive (but never offensive or unprofessional).

Use Multiple Channels

In today's electronic age, handling invoicing and debt collection over email is simple and quick, but it's not without its concerns. Email correspondence can easily become buried in an overstuffed inbox. Use additional means of reaching out to your customers who have missed a payment. Picking up the phone is a great first step, whereas a certified letter may be called for after weeks of no response.

Empower the Right People

As a small business owner, the temptation is great to have the salespeople handle their own accounts receivables, but it’s much better to assign one person to the task of debt collection. Designate your debt collection lead and provide proper support, training, and incentive to do the job right.

Call the Heavy Hitters

After numerous calls and collection letter correspondence, you may reach a point where the account is long overdue. If necessary, you might consider bringing in a collection agency to handle these delinquent clients. Spending too much time and resources can be draining on your operations.

Don't Ignore FDCPA

There are laws and regulations that govern how collection agencies can go about collecting the debt. Debt collectors cannot lie to, mislead, or harass your customers. Make sure the collection agency you select abides by the Fair Debt Collections & Practices Act (FDCPA).

Run a Credit Report

Reduce your overdue accounts by running a credit check on your potential client or customer before the deal is done. Expect to spend at least $30 on a Dun & Bradstreet (D&B) report. D&B uses self-reported data but adds credibility by including banking data from company suppliers, bankruptcy filings, media sources, suits, liens, and judgments.

Always Check References

Any small business planning to sign a "big deal" would be advised to run trade and bank reference checks. Simply reaching out to your potential client's or partner's bank can reveal important banking relationship information and how they have maintained their accounts in the past. Like a background check, taking this step can identify potential red flags before an invoice is even printed.

The Bottom Line

Handling the debt collection process is a responsibility of successful business ownership. Too many small businesses place aging receivables and collections as a low priority. It’s important to monitor your cash flow and aging receivables on a monthly basis or more. It’s ok to write off bad debt, but in the end, it’s your business savvy to handle the matter that will impact your growth.

Need help writing a debt collection letter? Review ​sample collection letters to get ideas.

If you own a small business, you may know how difficult debt collection can be. Small business debt collection is often one of the main failing points of many businesses throughout the country. With a little practice and courage, however, you may be able to lessen the amount of late payments that are due to you, and even develop an understanding of when to expect non-payment from a customer. If you can learn effective communication skills, you may find that you can spot problems before they become too big, or even before they happen at all.

Types of Late Paying Customers and Clients

In general, small business debt collection has to do with collecting monies owed from customers and clients who fall into three categories:

  • Customers and clients that will go to any length to avoid paying.
  • Customers and clients that tend to have many payments due at once and pay them sporadically.
  • Customers and clients that normally pay on time, but cannot because of financial trouble.

In general, you will want to ensure that your clients and customers fall into the last two categories. You will be able to manage and work with those that fall into the last two categories because they have a history of making full or partial payments. As a small business owner, however, you need to be able to devise a strategy and method for figuring out which clients and customers fall into the first category. In general, you will want act quickly with regards to the first kind of customer, perhaps by calling a collections agency or considering litigation to collect the debt owed.

There is a general rule that should be applied in all small business debt collection — act quickly and stay determined. No matter what kind of client or customer you are dealing with, acting quickly will ensure that you maintain your right to the money owed, and staying determined can ensure that you get paid in full. You should send bills and reminders to debt-owing clients and customers on a regular basis. There is no reason to wait until the end of a month to send an invoice or a past-due notice, send them immediately when the invoice comes in or when an amount is past-due.

Collections agencies are regulated through the Fair Debt Collection Practices Act, which prohibits certain actions that may be considered harassment or fraud. What follows are some more helpful hints for small business debt collection:

  • Avoid harassing the people that owe you money. This is both a good customer service policy as well as a good legal policy. If your actions can be considered harassing, you may wind up losing a customer as well as facing a legal challenge. If you call your debtors, be sure not to leave more than one message per day, and never threaten or speak ill of a debtor.
  • Keep phone calls short. To keep phone calls short, be sure that you are on message, short and formal. Try to be sure that the person on the other end of the line does not take the phone call personally. Do not imply that failing to make a payment is the same as a personal failure. Be sure to stay calm during the conversation, but always be clear that there is a debt that needs to be paid.
  • Write letters. The letters that you write to your customers and clients that owe money are called demand letters. You should be sure to send these in addition to making phone calls. Save copies of each letter you send. They may be useful if you have to go to a collections agency.
  • Get a collection agency to write demand letters. Collection agencies are professionals when it comes to getting money that is past due. Therefore, it is no wonder that they write great demand letters as well. Many collections agencies offer this letter writing service at a fixed cost. You will normally get a series of letters to mail, each one escalating in intensity.
  • Offer to settle for less than is due. If you think that a debtor would be willing to do so, you may want to offer to settle for less than is due to your small business. This is an often used strategy on clients and customers that have no real hope of paying off the debt they owe. This settlement should be made official in a legal document that shows a payment of less than is due that satisfies the entire debt.
  • Hire a collection agency. Collection agencies can often be your only hope to collect any money from a debtor. These agencies often charge up to 50 percent of what they collect, but getting some money is often better than getting nothing. You can find out more about collection agencies by visiting the Commercial Collection Agency Association.
  • Small claims court. If you do not want to go through a collection agency, you have the option of filing a lawsuit to get the money you’re owed. Depending upon your state, you may be able to file a claim in small claims court to recover the money owed to your business. Small claims court is a great arena for small businesses, as these courts are designed to eliminate the high costs of attorneys and other court fees. In fact, small claims courts are such a popular tool for businesses to use to collect debts that, according to at least one source, 60% of all filings in small claims courts are by small businesses.
  • File a lawsuit. If small claims court is not an option for you, and the amount of money is too great to hand over 50% of it to a collection agency, you may have to file a lawsuit in order to recover the debt. There are higher costs associated with this method, however, such as fees for attorneys as well as court costs.

Get Legal Help With Your Business Debt Needs

If you’re trying to collect from late-paying (or non-paying) customers, it can have a serious impact on your ability to do business, while eating up valuable resources and time. Make sure you’re doing it efficiently and in compliance with the law by speaking with an attorney. Don’t let unpaid bills sink your business — talk to a local business attorney today.

How to collect small business debt

For a small business, accounts receivable are both a pain and a lifeline. You need the money customers or clients owe you. But you don’t want it to be a hassle.

Your first priority should be to follow the appropriate procedures and laws. But there’s more you need to know before you go deeper into the debt collection process.

Small business debt collection process

Collecting a debt as a small business starts gently and escalates as time goes by without payment. Begin as you normally would: with an invoice.

Invoice

How to collect small business debt

First, you send an invoice/bill to your customer or client. This should have a clearly stated amount owed and due date.

Nonpayment

If the due date goes by and you haven’t received a payment, the value of the invoice becomes a debt owed to you. Penalties and fees may also apply, as outlined in your contract agreement. Now you must take extra steps to collect.

Reminder after the due date

Shortly after the due date, send a polite reminder to the delinquent customer via email or phone call. Emphasis on the “polite.” It’s possible that the invoice was simply lost or forgotten, and you don’t want to burn any bridges.

Debt collection letter

Your more casual first reminder may not have been enough. Make it more official with letters. These are called demand letters, and it’s essential that you keep copies of every demand letter you send. The letters will get more direct and firm as time goes on.

Collection agency

If the letters aren’t working, you may need outside help. Think about hiring a debt collection agency. They charge a large portion of what they collect — usually around 50% — but it’s better than getting nothing.

Small claims court

This is another option for those who don’t want to work with a collections agency. You can file a claim in your state’s small claims court to get what your customer or client owes you. This can be effective, but also expensive and time-consuming.

Lawsuit

For large amounts of money, you can also consider filing a lawsuit. However, like filing a claim in a small claims court, a lawsuit can be expensive and time-consuming. Make sure the amount of money owed to you is worth the trouble before filing.

What to do

DO understand your customers and clients

Collecting debt is frustrating. But your customers and clients are human, too. And if you remember to treat them as such, you’re much more likely to retain a positive relationship.

Their reason for not paying an invoice could be something as simple as forgetting, or they could be dealing with financial hardship. The more compassionate you are, the easier it will be to get a payment or work out a deal.

DO follow FDCPA rules

FDCPA stands for Federal Debt Collection Practices Act. This law defines the legal line that debt collectors cannot cross.

Here are some examples:

  • You can only call between 8 a.m. and 9 p.m.
  • You can’t contact a debtor’s employer, friends, or family about the debt.
  • You can’t threaten or harass the debtor.

Read more about Federal Debt Collection Practices Act rules here.

DO know when to hire an agency

At a certain point, the resources you’re using to track down a debt will stop being worth it. This point will be different for every small business.

Keep track of how much time and money your employees spend trying to get the payment due. Is it worth the amount owed? If not, it may be time to work with a debt collection agency.

What not to do

DON’T leave accounts receivable up to individual salespeople

It’s tempting to have an everyone-for-themselves attitude, but it’s better to have one person in charge of collecting debts.

DON’T use a different business name when collecting debt

Even a slight name change – like using an acronym – can be a red flag to the FDCPA. Use your official, full business name in debt collection communications.

DON’T ignore your state debt collection laws

Some states have even stricter rules than the FDCPA. Check your local laws to ensure you’re operating within all regulations – not just the federal ones.

Before working with another business

Small businesses doing business with another business (B2B) should perform two checks before they sign any contract: a credit check and a reference check. These tell you more about the business’ debt history, and can give you warning if you may have problems collecting payment from them in the future.

Credit check

Purchase a business credit report from Dun & Bradstreet (D&B). This credit reporting agency can tell you about the potential partner or vendor’s credit history.

Reference check

Reach out to the potential partner or vendor’s bank to perform a reference check. You can learn more about how they handle accounts.

The bottom line

The bottom line when it comes to getting your bottom line is this: follow the rules and know your limits. When collecting debt yourself, it’s still important to abide by the FDCPA and your state laws. And when things get to be too much, know when to work with a third party to get at least part of what’s owed to you.

SME & small business debt collection & debt recovery

We recognise that the debt collection requirements of SMEs and small businesses vary greatly from those of large corporate firms.

That’s why we break down our services the way we do, allowing us to provide SMEs and small businesses with the level of support and a pricing structure that meets your expectations.

So whether you have an individual customer who’s refusing to pay, a number of overdue invoices which are consuming too much time or you’re looking to outsource all or part of your credit control function, we’re confident we’d be your ideal debt collection partner.

Our services to SMEs and small businesses

Single Debt Recovery

Whether you have an invoice which is particularly overdue or highly valued, we can recover any individual invoice for a success-based fee and remove the burden from your business.

Multiple Debt Recovery

We can assist in recovering a large number of overdue debts, whether you’re looking to refocus your attention on newer invoices or looking for ongoing support with any invoices which reach a certain age.

Credit Control

Our confidential credit control service brings expertise to the process and improves collections times, allowing you to spend your time focusing on your core business activities.

Debtor Tracing Services

Whether you’re about to offer credit or your business is struggling to find a debtor, Hilton-Baird’s debtor tracing services could be a valuable resource.

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How to collect small business debt

Nation’s Leading Debt Collection Agency for Small Businesses

Managing accounts receivables (AR) is critical for maintaining the health of a company. When you start to see open invoices lingering unpaid for more than 30 days, the company’s bottom line begins to suffer. You’re in business to make money, not to become the banker for another business. Slow pay or no pay, we’re here to help collect your accounts receivable accounts.

Empire Credit and Collection is a BBB accredited small business collection agency with an 82% success rate on small business debts. We will match any of our competitor’s rates, and you will not pay us a dime until we successfully recover your debt.

COVID-19: Business As Usual

Many of you have been affected by COVID-19 and the unprecedented lockdown. We understand the difficulties you may be experiencing during this time and want to reassure you that it is business as usual Empire Credit & Collections. All of our online debt collection services are readily available, and our trusted network of resources is here to help collect what’s owed to your business.

Your Solution to Overdue Accounts

If someone owes you money, get a Free Instant Quote today!

Every Small Business is Different

Whether a tech startup or a mom-and-pop shop, the frustrations associated with collecting debts are similar from one industry to the next. But outside of that, all small businesses are different and face unique challenges they must overcome. These challenges are usually based on a business’ receivables and the terms being offered to clients and customers. In a nutshell, the success of a business often depends on the invoice payment terms that the owners create when sending out invoices.

As the nation’s leading collection agency for small businesses, we are commonly asked these questions:

  • How can small businesses increase their chances of collecting debt?
    • What can small businesses do to collect their debts?
    • Why do small businesses need a debt collection agency?

    How Can Small Businesses Increase Their Chances of Collecting Debt?

    With the day-to-day responsibilities piled high, contacting customers who owe money may seem like a dreary task. Small businesses can do a several things to collect their debts — contact the debtor themselves, set up a payment plan, or threaten to sue; but that takes time and energy that small business owners, like yourself, probably do not have. One of the reasons why a significant number of small businesses do not recover their debt is because they do not have the bandwidth to contact all their customers to settle their balances. This is why small businesses need a debt collection agency — we will utilize our vast network of 400 affiliate attorneys and agencies who are compliant with federal, state, and local collection laws. We have a no collection, no fee service, so if we don’t get you paid, you owe us nothing.

    When Should a Small Business Hire a Collection Agency and Why Should Small Businesses Collect Their Debts Now?

    How to collect small business debt

    If the debtor is 1) unresponsive, 2) insolvent and isn’t making it a priority to pay you, or 3) refusing to pay because he or she is unsatisfied with your product/services, take action as soon as possible. As confirmed by Caine & Weiner, older debt is harder to collect! Within the first month, you’d have a 94% probability of retrieving payment. However, with every month that passes, you’ll notice that the likelihood of recovery drastically decreases, especially after the third month. The longer you wait, the lower your chances are of collecting. Older balances may be increasingly difficult to collect for a multitude of reasons: proof of delivery is unavailable, the debtor files bankruptcy, records have been misplaced, etc. The sooner you start working with a debt collection agency, the better your chances are of getting what’s owed to you.

    No Recovery No Fee – Get a Free Collection Quote Today!

    How Do I Hire A Small Business Collection Agency?

    There are a variety of ways you can jump-start the collection process and recover your debt now: get a free collection quote, submit your account online for review, or contact us to learn more about small business debt collection. We act as an extension of your business, and if you have never worked with a debt collection agency before, we can be there every step of the way. If you’re already knowledgeable in the world of debt collection, we’ll tailor our services to fit your needs. There is no cookie-cutter approach and we can ensure we’ll put the time, effort, and resources into recovering what’s owed to you so you don’t have to.

    Tips for Small Business Debt Collection:

    • Gather as much pertinent information about the debtor as possible (ex. contact information, the original agreement, etc.).
    • Do not delay working with a debt collection agency if you can help it.
    • Find a debt collection agency that is willing to work with you and tend to the specifics of your business.
    • You get what you pay for–our percentage rates may be high, but our success rates prove our services are worth every penny.

    How Quickly Can I See Results?

    In some cases, you can get paid the same day you contact a small business debt collection agency. In other instances, it may take months or even years to collect the debt. This is all dependent on how old the debt is and what other measures have been taken to contact the debtor.

    Our 3-phase process covers all avenues of collection attempts. Whether it be contacting the debtor through letters, phone calls, voicemails, emails, and text messages (phase 1); corresponding through a local attorney (phase 2); or going in front of a judge and being awarded a judgment through court (phase 3).

    If you wait too long to collect your debts and the statute of limitations has expired, we cannot sue to collect the balance. This limit is determined by the statute of limitations (SOL) of the Fair Debt Collection Practices Act (FDCPA) and varies by state and type of debt. Limitations are typically between three and six years, but can be for longer. In short, we will continue the collection process for as long as the law allows us to.

    How Can I Get My Money After It Has Been Collected?

    After the payment from the debtor has been cleared. We can pay you in one of two ways: 1) check or 2) ACH. Sometimes, the debtor will dispute the credit card charges or the debtor’s check can bounce, so it’s important to keep the clearance process in mind. When it is confirmed the debtor’s payment is settled, you get paid on a monthly basis usually on or around the 1st of the month.

    If you are tired of sending invoices to customers who ignore them and you are ready to do something about it, get a free collection quote today. You can even submit your account online for review by one of our debt collection specialists.

    If you are chasing unpaid debts from customers or other businesses there are steps you can take to recover the money and measures you can put in place to reduce the chance of it happening again.

    Preventing bad debts

    It is important to perform background checks on your customers before doing business with them.

    If the business you are dealing with is in administration, liquidation or deregistered they may not have the ability to pay you. Check whether a company is in liquidation or deregistered on ASIC Registers.

    To prevent bad debts occurring and protect your business you should:

    • Only send out goods or provide services after customers pay their bill
    • Provide simple, easy and clear payment options
    • Invoice customers quickly
    • Give discounts for paying on time or early
    • Create sensible limits on the credit that customers can take out with your business.

    How does a business recover debt?

    When you have not been paid for goods and services you provide, the profitability and cash flow of your business can suffer. It is important to establish a process to manage payments and recover debt.

    Here are key steps to include in your debt recovery process:

    • Check contract terms to see when payments were due
    • Contact the customer in writing to request payment
    • Keep records of all customer correspondence
    • Set up regular payment reminders
    • Send a formal letter of demand
    • Consider hiring a debt collector if the customer still won’t pay
    • Consider taking legal action
    • Do a property search on the Personal Property Security Register (PPSR) to recover unpaid goods.

    Business.gov.au is a great website for small businesses that provides template emails to recover debts.

    What to do if a customer refuses to pay

    In deciding whether to pursue debts, you’ll have to weigh up how much is owed, the cost and time it will take you, and whether the business you are chasing has the ability to pay the debt.

    Get legal help to recover debts

    If your customer refuses to pay or doesn’t return calls, here are some organisations that offer legal help.

    Small Business Commissioner or Ombudsman

    Small business commissioners and ombudsmen are government appointed advocates that represent the interests of small business. Services include advice on how to recover debts and subsidised or low-cost dispute resolution. Contact your local Small Business Commissioner or Ombudsman.

    Community legal centres

    Community legal centres offer evening advice clinics, letter writing assistance and help with filling out Court forms. Search for a local community legal centre on the National Association of Community Legal Centre website.

    Legal aid commissions

    Legal aid commissions can assist with serious legal action that you can’t afford to take on yourself. You should check whether your case fits their guidelines. Services include free information sessions and initial legal advice, letter preparation and assistance running a court case. The Australian Government website provides links to all legal aid commissions.

    Small claims tribunals and lower courts

    Tribunals and courts provide quick, simple, legally-binding solutions, without having to use a lawyer or deal with court procedures. Services include general advice, assistance completing forms, help arranging a summons and informal dispute settlement before a magistrate. The ACCC’s website has a list of small claims tribunals.

    County, district and supreme courts

    These courts will decide on disputes where the amount owed is too high for a small claims tribunal or lower court. Consider using a lawyer if your case goes to one of these higher courts as procedures are more formal and complicated.

    Private legal advice

    Using a lawyer can sometimes save you money if you are owed a large amount but they can cost you money if the Court doesn’t order the company at fault to pay your legal costs. Services a lawyer can provide tailored legal advice and guidance, letters of demand and court case management from beginning to end.

    Debt collection agencies

    Using a debt collection agency can take the burden off you but you must be prepared to forgo a percentage of the amount owed. You’ll need to work out if the debt collection fee is worth the cost of recovering the debt.

    Services include contacting and chasing up debtors, sending a letter of demand, preparing a summons and running court action.

    Remember that even if an order or judgement is made for a business to pay a debt, you’ll still need to enforce the order. This can be difficult and can be an added cost. Find out more about the rules on debt collection on the ACCC’s website.

    For small businesses, late payments can be a serious – possibly even critical – threat to your ability to continue trading. According to research from GoCardless , 2 in 5 SME businesses have serious cash flow problems as a result of late payments, while 58% of SMEs think that late payments are putting their business at risk of failure. When attempting to settle the invoice amicably fails, you may need to begin the debt collection process. Find out everything you need to know about debt collection in the UK for small businesses with our helpful guide.

    When is a payment considered to be late?

    When it comes to debt collection, the first thing you need to know is what constitutes a late payment. This should be made clear in your invoice’s payment terms . Most businesses implement net 30 payment terms, meaning that the customer has up to 30 calendar days to pay the invoice. You may also have implemented longer payment terms, like net 45 or net 60, or shorter payment terms, like net 7.

    If you didn’t include payment terms in your invoice, the government states that a payment can be considered late if it still hasn’t been paid 30 days after the customer received the invoice or 30 days after they received the goods/services (if this happens later). After this 30-day period has passed, there are a range of different debt collection options that your business can pursue to settle the invoice.

    First steps in the debt collection process

    If your business is dealing with a late payment, it’s important not to overreact. In many cases, a client will simply have forgotten to pay or their accounts payable team is dealing with a backlog. Often, a reminder letter, email, or phone call is all that’s necessary to prompt payment.

    If, after a couple of attempts to get in touch, your business still hasn’t received payment for the invoice, you may need to send a debt collection letter, also referred to as a letter of demand. This is a much more serious step and should only be taken if your previous contact attempts have fallen on deaf ears.

    If you send a debt collection letter and still don’t receive a response, it may be time to look into professional debt collection services. At this point, you can also start charging late payment interest on your invoice, which may encourage your customer to stump up the money.

    Professional debt collection services

    There are two key forms of professional debt collection:

    Debt collection agencies

    Most of the time, hiring a solicitor is likely to be the most cost-effective option. A debt collection letter with a legal letterhead is likely to be much more of a motivating factor for payment than a letter from your own firm. As a result, a letter from a law firm may be all that’s needed to prompt payment.

    If that doesn’t work, it may be necessary to involve a debt collection company. Although debt collection services can be expensive, they’re often the most effective way to settle a late invoice, as your clients may be wary of a mark on their credit record or the threat of their company going bust.

    If you do hire a debt collection agency, it will almost certainly lead to a permanent breakdown in your relationship with the customer. Plus, debt collection agencies can often be heavy-handed, and your business’s reputation may suffer as a result of the debt collection tactics that they employ.

    Taking debt collection to court

    The final step in the debt collection process is taking the matter to court. This should be considered a last resort as a judge will need to be satisfied that you’ve exhausted all your other options before litigation. There are several different steps to debt collection via court. First, you’ll need to make a County Court Claim, which is a claim for the unpaid invoice. Assuming that they don’t defend the debt (or that their defence is unsuccessful), you’ll receive a County Court Judgement, which is an enforceable court order requiring the debtor to pay the debt, interest, and costs. You should also apply for an order to wind up the company, which may be enough to convince the debtor to finally make payment.

    We can help

    GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments .

    Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

    Small & Medium-Sized Businesses Need a Debt Collection Agency

    As a small or medium business, you need to protect your bottom line. But getting your valuable customers to pay is one of the biggest challenges you face. Spend your valuable time on what matters most—driving your business toward success—and let IC System’s medium- and small-business debt collection agency solutions take care of your accounts receivable challenges.

    Want to know more about our small- and mid-sized business recovery services? Learn more about IC System and how it works.

    Integrate Our Tools & Speed Up Profit Recovery

    You can access your full inventory and monitor our progress on your accounts with our online tools. Your inventory will be in collections within one business day when you send accounts online, ensuring a smooth transition and faster recoveries. All the tools you need are right at your fingertips. With IC System’s tools and resources, you’ll have access to:

    • Automatically send debts
    • Reduce inefficiencies
    • Increase incoming revenue
    • Get detailed effectiveness reports

    How to collect small business debt

    Recovery Plans for Any Size Business

    Streamline your accounts receivable processes and focus on growing your business with our recovery plans. No matter which industry you work in, there is no better way to maximize your revenue than with small business debt collection experts who provide you with the resources it takes to recover the money you are owed.

    Your customers will be treated with respect at every point of contact with IC System’s services, Accredited and A+ Rated by the Better Business Bureau. With our powerful tools and dedicated team by your side, your business can add predictability to accounts receivable and maximize revenue like never before.

    Recovery Plus

    Get paid fast by using Recovery Plus, the most effective collection plan from IC System. Our consumer-friendly collection efforts will clean up your accounts receivable and maintain healthy relationships with your consumers.

    You keep 100% of recovered money during the initial letters-only phase, where we charge as low as $9 per account. In the secondary collection phase, you pay a competitive flat rate for debt collection services—and we charge half the industry average because our letter method is so successful!

    • Per-account flat fee pricing
    • High success rate — get paid fast!
    • Optional Credit Reporting to major bureaus
    • Optional Credit Monitoring to increase recoveries on older accounts

    Premier Collect

    Premier Collect is a contingency collections plan ideal for offices seeking payment on past due accounts. The collection agency fees for this debt recovery program are contingency-based and adjustable based on your business needs.

    • Optional credit reporting to the major bureaus
    • Optional credit monitoring to notify us of an important change in the consumer’s credit status that may indicate an ability to pay
    • Optional attorney referral services in which payment demand contacts are made by an independent attorney
    • Optional litigation referral services if you decide to take a consumer to court

    “What I like best about IC System is that it takes the stress off of the collection process allowing us time to do our other work.”

    “It has been a pleasure to work with IC System for almost 10 years. I feel as though I’m calling a friend.”

    “I love that IC System takes the effort to collect on past-due debts at my store so that I can focus on current customers.”

    Unsure Where to Start?

    The bottom line: You need a small business collections partner who works with your consumers to recover accounts while treating them with empathy. On every call, we ask consumers to take a survey and rate their experience. Over 99% of consumers feel they have been treated professionally. Learn how IC System listens to feedback from consumers to ensure professionalism and satisfaction on every call.

    IC System is big enough to meet your needs through our variety of resources and innovative technologies, yet not so big that we can’t move fast and provide tailor-made solutions. Our profit recovery services also feature several effective services and options, including online tools, credit reporting, non-litigation and litigation attorney referrals.

    Experience in Any Industry

    No matter your industry, business size, or number of accounts, IC System can help. Our collection strategy applies customized analytics to your inventory, drawing on data gathered from thousands of clients across multiple industries to develop an approach best suited to your accounts. See some of the industries we’ve worked with the most over the years.

    Pest Control

    Hundreds of pest control companies nationwide have recovered their past-due accounts because of IC System. Discover our smart and effective solution that has a higher rate of collection than most. Learn More.

    Veterinary Medicine

    Veterinary medicine remains one of the most defaulted of all healthcare industries. IC System knows that getting paid for the services you provide is (almost) as important as keeping our animal friends healthy. Let IC System take care of unpaid pet owner accounts; you take care of the pets. Learn More.

    Chiropractic

    Every unpaid account at your chiropractic clinic can impede your office from running smoothly. Our highly-trained patient financial representatives will recover your past-due accounts and, most importantly, maintain your valuable patient relationships while doing so. Learn More.

    Optometry

    In the optometry field, it can be challenging to find a revenue recovery partner that understands the intricacies of patient billing. IC System’s patient financial representatives can speak intelligently to your patients about insurance and other optometry-specific concerns to help recover your accounts receivable. Learn More.

    Competitive Pricing for Every Business

    Your small or medium business will benefit from our economical rates and customer-friendly approach. Discover why our debt collection services offer not only a powerful tool but also an effective way to help preserve your valuable customer relationships.

    Your comprehensive pricing request will include the following:

    • No cost pricing quote for your IC System services
    • Materials to help streamline your accounts receivable
    • A sample IC System agreement
    • Establish a follow-up plan

    Get In Touch

    Not sure where to start? We’ll help you identify the next steps to overcome accounts receivable challenges. Please fill out our form or call 1-800-279-3511 to learn more or request pricing.