Contracts and debt collection go together. A solid customer contract needs to be executed before your product or service is provided. There are many parts to a customer contract. Here I will address only the part of the contract that applies to how and when payment will be made, and what will happen if payment not made on time.
If you are going to extend credit, you must have a contract.
I can just see you reading that statement and thinking that it is not possible. You are thinking that it would be too difficult to have customers sign a contract, and would slow down the flow of your business. However, consider that it does not have to be difficult. As an example, a new customer calls a lawn care company and asks for service. Your confirm the price you will charge and how you wish to be paid. You ask for an email address and send the following email to the customer;
Our price for a spring clean up of your property will be $ 350.00. Our invoices are due and payable on receipt. Any invoice not paid after thirty days will be subject to a interest of 1.5% per month (18% annual). If your account remains open for more than 90 days, you will be referred for outside collections and you will be responsible for all costs of collection.
Remember that a contract has to be bilateral, meaning both parties have to agree.
Ask the customer to reply to your email stating that they agree to your terms, and you have a simple contract! Your customer now understands and agrees to your terms. They know you are serious about being paid. You can now legally assess interest and cost of collection.
Do you want to offer payments? You must document your arrangement.
Ask customer to sign a promissory note. If you think a promissory note seems too difficult, once again you can confirm terms in an email. For example:
The price for our service is $ 1,000.00, which will be payable in 4 monthly installments, with payments due on the first of the month, beginning on July 1, 2018. Failure to make payment exactly as stated will void the arrangement and the full balance will be immediately due and owing.
It does not have to be difficult. It takes a little planning and discipline. If you extend credit, and do not take the time to get even a simple contract, you are only hurting yourself.
