6 Debt Collection Mistakes to Avoid

From the LegalShield Small Business News newsletter:

It is vital to secure your interests with policies, contracts and systems that protect your ability to collect debt. By avoiding these common mistakes you may decrease the need for collections and improve your collection efforts should they be necessary. If you need assistance collecting a debt call your LegalShield provider law firm.

1. “We didn’t have a payment policy or written contract.” – Handshake deals and verbal agreements are difficult to legally enforce. It is essential to have a signed contract for any product or services for which payment will be made at a later date. Your contract or agreement should include a uniform payment policy. Your policy should include exact due dates or a timeline for payment, the name of the individual or business responsible, accepted forms of payment and any potential fees or interest for delinquent payment.  (Kelly edit for members: Use your provider law firm to review your contracts without worrying about being billed for it.)
   
   
2. “Our accounting records are a disaster.” – Accurate and detailed records will help you quickly identify and deal with delinquent accounts. Your customers and clients should know exactly where their account stands. Provide itemized invoices that include a specific due date for payment. If an account is delinquent, include the total amount owed, the number of days past due, the original due date and any late fees or interest owed. ((Kelly edit for members:: For accounting questions, write to the business consultants - no charge.)
   
   
3. "We waited because we didn't want to upset the customer." – If a 
customer's account becomes past due consider placing an immediate hold 
on the account and contact the customer. The longer a customer's account is delinquent and the more debt they accrue the more difficult
 collection becomes. Always remain professional and courteous but you may 
choose not to provide additional services or products until payment is
 made.
   
   
4. “We don’t have any documentation but I remember talking to the customer.” – Good accounting practices will insure you retain copies of bills and invoices. You must also document your collection efforts. Your records should include letters and emails, as well as the dates and times of any phone calls or meetings. This information will be extremely important if legal action is necessary.
   
   
5. “I was so mad I couldn’t stay calm.” – Remain professional and friendly during each interaction with delinquent customers. It is illegal to threaten, harass or intimidate customers who are unable to make payment. Never threaten an action you are not willing or legally allowed to make. Making the issue personal or becoming aggressive will hurt your chances of successfully collecting the debt and could land you in legal trouble.
   
   
6. “I didn’t really think the attorney could help.” – Utilize your LegalShield membership. Call your provider law firm for assistance with collection matters. Your attorney can help you understand the law, draft a collection letter on your behalf, review your contracts and answer other legal questions you may have. If a collection letter does not resolve the matter, your provider law firm will advise you on additional legal remedies available to your business.