“Ask CashFlo” is a credit and collections advice column for small businesses. Questions may be submitted via email to flo@askcashflo.com. Follow Ask CashFlo on Twitter @AskCashFlo. CashFlo reminds readers that she is not an attorney and nothing in this column should be construed as legal advice. As CashFlo always says, “When in doubt, consult your attorney”.
Dear CashFlo,
I run a small business and I would like to try to recover bad debt on my own first before I send it to a collection agency. Can you tell me what actions I can take to collect on my own? Am I prohibited from any specific actions?
Sincerely yours,
Perplexed in Portland
Dear Perplexed,
While debt collecting can be a difficult task, we think it is a great idea for a small business owners to attempt bad debt recovery themselves first. Businesses that focus on their aging receivables and follow a plan to collect monies owed to them are healthy companies.
In certain states, there are laws that govern creditor actions. These laws are similar to the laws put in place for third party consumer debt collectors. Check the laws in your state regarding debt collection and fair trade practices. Generally, perform bad debt recovery in the same professional manner your other business functions.
A well crafted collection letter will help you. Draft it once and you can adapt it as needed. You will use it time and time again. Similarly, train your staff using a script to make make follow up calls to delinquent customers.
Should be angry if someone does not pay you? Sure you should! However, acting in anger, pretending to be someone else (such as having someone in your office call pretending to be a lawyer), telling others they don’t pay their bill etc, are all “CashFlo No-No’s”! Take the same high road you take with your other business dealings. Never take any action that could be considered deceptive. Never use threats or intimidation, which besides being rude are usually ineffective. Yes, customers who do not pay you may make you angry, but you cannot make it personal.
Yours truly,
Ask CashFlo
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