While accepting credit cards isn't right for every business or every transaction, doing so allows you to place the burden of collection on a third party, namely a credit card company. If your customers purchase goods from you, the small fee you'll pay to accept credit cards much less than it costs to hire an attorney or outside agency. Let Visa or Mastercard deal with collecting debts while you stick to what you do best: running your business.
2. Do a Credit Check
Since credit checks can take a little time and money, they are especially important when your client or customer will be owing you a large sum. Don't bother running one for a $40 transaction; it simply isn't worth your time. But if you're entering into a long-term relationship or one with a large impact on your bottom line, run a credit check. It might not guarantee payment, but it can help you avoid problem clients and customers up front.
3. Check References
Again, this tip is most important if you're planning on doing large or continued business with a client or customer. Contact your potential client's past business partners and make sure those partners had positive experiences and were able to get paid in a timely manner. Invite your potential client to do the same with your past business partners as well.
4. Write a Good Contract
Putting the terms of your arrangement (including the payment amounts and due dates) in writing is a must. By naving your customer agree to the terms in writing, you help ensure that the terms are clearly communicated and agreed upon. They have a much harder time making excuses like, "I didn't say that I would pay you that much!" That's why you need to have it in your contract. You can create business contracts online at Rocket Lawyer.
5. Make Polite Contact
Before you call a debt collection agency or an attorney, it's a great idea to simply contact your debtor. As mentioned above, it's totally possible they just forgot. In this instance, a polite reminder can do wonders.
But no matter what, debtors are much more likely to pay if you're positive and polite. A phone call, email, or letter that simply asks them if they realize they're behind on their payments is the best way to begin.
The hard truth is that sometimes, you'll end up with a delinquent debtor. No matter how diligent you are up front or how much care you take selecting business partners, you can end up dealing with the debt collection process. But by following a few simple hints above, you can effectively reduce the amount of problem debtors you'll have to deal with.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.