Resolving Customer Debt

If they go unpaid for too long, customer debts can drag down the bottom line of your small business. However, collecting on these debts requires careful planning, knowledge of state and federal laws, and a commitment to clear and appropriate communication. Start with these tips that can help you resolve nagging customer debt in a way that’s both professional and effective.

Know what type of customer you’re dealing with

You might find yourself dealing with different types of indebted customers, according to FindLaw’s team of legal writers. Some customers have a track record of paying promptly but may have simply forgotten. Others may be experiencing money problems. Some larger customers may be dealing with multiple payments at once and aren’t prioritizing what they owe you. And some customers don’t intend to pay you at all. When you go about resolving customer debt, make sure you tailor your approach to the situation. A heavy-handed strategy could alienate a loyal, longtime customer, while gentle nudges won’t work with someone who plans to skip out on their obligations.

Escalate debt resolution gradually — but promptly

If a customer has missed one or more payment due dates, Darrell Zahorsky of The Balance Small Business recommends a gradual approach. When you reach out, start with a friendly reminder. If that doesn’t elicit the desired response, your following messages will need to be more direct and forceful. Per Zahorsky, this gradual approach also translates to the channels you use to communicate. A simple phone call could be your first step, but a certified letter sends a more official and urgent message. As you proceed, make sure you carefully document each step.

Always keep it professional

As you go about resolving customer debt, always maintain a professional attitude. According to FindLaw, maintain your calm during any phone conversations, don’t make threats, and don’t make it personal. To maintain this professional approach, Zahorsky recommends designating one trained employee at your business to lead debt resolution efforts. That way, you can maintain a consistent, organized approach instead of wasting resources or sending the wrong message by having too many different people involved.

Be prepared to seek outside help

Sometimes, in-house efforts won’t be enough to resolve a debt. You may need to hire a collection agency. Collection agencies specialize in debt resolution and can step in when you simply don’t have the time or resources to follow up. If a collection agency won’t get the results you desire, you may also be able to file a lawsuit in small claims court. If you take either of these routes, make sure the resources you expend are proportional to the money you’re owed.

Follow all federal and state laws

Whether you are resolving debt yourself or working through a collection agency, it’s essential that you obey all state and federal laws. For example, FindLaw notes that the federal Fair Debt Collection Practices Act prohibits harassment, abuse, threats, misleading statements, or unfair practices during the process of debt collection.

Dealing with customer debt can be an enormous — and expensive — inconvenience for your business. With the right strategy, though, you can obtain what you’re owed while conserving your time and money.

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