I remember when I made the transition from working for a large corporation to working in my small family business. After a few days, I noticed that my trash can was full, and it hit me. No one was coming at night to empty my trash or vacuum the carpet in my office. It was now on me, just like very other aspect of my business.

Small business owners do it all: sales, customer service and administration. All too often we see successful small businesses flounder because they are focus solely on new business sales and customer service and do not stay on top of their accounts receivables. Small business owners often confuse being busy with being profitable. They are so focused on filling the new business bucket that they do not realize that there is a huge hole in that bucket – non-paying customers. Many businesses believe, wrongly, that they can get a tax beneift from writing off bad debt, when in fact this is not true.

No one likes having to plan on not being paid, but it is a sad fact that business owners must do it.  A solid customer contract is a must and will minimize the number of past due accounts, but any business that gives credit must have a process ready to manage their debt collection.

The good news is that small business debt collection process can easily be streamlined and integrated into the business. We recommend to our clients that they have both procedures to pursue bad debt in-house and also a way to move the process to a third party local debt collection firm. 

Focus is key. One person in your company has to the point person. Develop a series of template collection letters that will can be personalized. We recommend three letters and in a 90 day period.Also, “friendly reminder” phone calls from customer service work wonders. If initial calls do not work, involve sales or account managers and senior management and leverage their relationships. 

At some point, you will have accounts that, despite your efforts, still will not pay. Do not delay sending them to a good local debt collection agency. Most collection agencies will not charge you any money upfront, but will be paid with a percentage of sums they recover for you. Most ageny fees are higher on debts that are older, so it is important to get your collection agency involved as early as possible.

Communicate with your debt collection agency any information you learn along the way, even if you do not think it is significant. Your collection agency should be a strategic partner in your business, and can assist with advice on your in-house practices as well. 

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