The basics of collecting debts for small business owners

by | Jul 11, 2019 | Uncategorized

If you are in the business of providing goods or services to customers or clients here in Austin in exchange for payment, you could at some point end up not receiving payment after doing so. Perhaps a customer or client simply forgot about an invoice and makes payment once you call to remind him or her or send a second invoice.

Unfortunately, it may not always be that easy. You could come across a client or customer who does not want to or claims not to be able to make payment. Now, you have to find a way to collect what the party owes you. How do you go about it?

Some caveats before you begin

Since you held up your end of the agreement by delivering the goods or services requested by a client or customer, you have the right to payment in accordance with your agreement. When you don’t receive payment legally owed, you have some options, but you also have rules to consider. You must not violate the Fair Debt Collection Practices Act, which prohibits you from engaging in certain behaviors and actions when attempting to collect a debt.

For instance, you should not harass, threaten to speak poorly about or leave more than one message per day if you call. You should try to keep your calls short, sweet and to the point. Provide concise information, remain calm and avoid personal attacks. Keep it business-like. These tips will help you avoid inadvertently violating the FDCPA.

Exercising your right to payment

Once you familiarize yourself with the requirements of the FDCPA and understand what you can and can’t do, including the tips above, when attempting to collect a debt, you are ready to take steps to obtain the payment your client or customer owes you. In doing so, consider the following:

  • As mentioned above, you could start with a reminder phone call. Doing so may be enough to receive payment.
  • If a friendly phone call fails to produce results, you could send a demand letter outlining the details, the request for payment and a deadline. A duplicate invoice should go in with the letter as well.
  • If you believe that the other party really can’t pay the full balance, it would probably be in everyone’s best interests to offer to settle for less than the full balance. Follow up any agreement with a written agreement in order to protect yourself should you still not receive even the settlement amount.
  • If all of these efforts fail, you could hire someone to take over the collection activities on your behalf.
  • In some cases, you may need to obtain a court judgment through litigation. If you receive one, you could then make use of other collection actions not otherwise available, such as garnishments, levies and more.

No matter what you do, begin a paper trail. Keep copies of everything. You will need this evidence if you end up in court, but it also protects you should the other party claim that you used tactics prohibited by law to collect the debt. Finally, you would benefit from consulting with an attorney who can help make sure you stay within the law and advocate on your behalf from the demand letter to a lawsuit.