“My customers love me. They will pay me sooner or later, if I just wait it out.”

This statement is true. Sort of. Sometimes. We hope that your customers love you. Loving you and paying you, however, may be two different things.

While we respect our clients’ willingness to wait on a good customer who is going through a hard time, we recommend that this be the exception, and not the rule. There is a big difference between a customer who communicates with you and gives you a reasonable promise to pay you in time and a customer who totally ignores your invoices and phone calls. It is important to separate the two.

If you decide to wait on someone to pay you, it is perfectly reasonable to ask your customer to sign a promissory note, which confirms the amount owed and expected repayment date. The note should also include information on what will happen is the debt is not paid as promised. If your customer is not willing to put their promise in writing, what is that promise really worth?

If people owe you money, chances are they owe other people money too. The squeaky wheel gets the grease. Do you really think all of their other creditors are waiting? If your client is a consumer, do you have idea what assets they have, and if those assets are in jeopardy? If you are working with a business, and do not have a personal guarantee, how certain are you that the business will not fold?

We received a file from a doctor who did a great deal of work for a woman who promised that she would pay him in full as soon as her house sold. She was a longtime patient, so he took her at her word. Her house was on the market for a long time, and during that time, real estate prices dropped considerably. She finally sold her house for less than she paid for it, left town with the bill unpaid. The bill is still in statute but the patient is now retired and has no assets. She is very unhappy about losing equity on her home, and is not paying any bills, and denies ever promising to pay. The doctor has nothing in writing.

Contrast the story below with what could have been a happier scenario – patient has a documented repayment plan and is making small payments to a collection agency, who keep her on track with regular letters and friendly reminder calls. When she leaves town collection agency has the tools to track her down and can work with patient to continue payments.

Using a collection agency escalates the urgency of getting a bill paid. A collection agency has the tools to assess a person’s ability to repay a debt, and can work with you to come up with a plan of action to get you paid. A person who is concerned about their credit rating will realize that paying a collection keeps a bad mark off their credit file.A collection agency has research tools to find people who move or change their phone numbers. 

And remember, waiting too long can cost you! 

How do you tell the difference between customers with temporary hardship and customers who are unwilling to pay? We would love to hear from you!

Do you want to minimize bad debt in your business? We’ve got tips on how to do just that!