What Are the Most Effective Collections Activities?

One of the biggest headaches of owning a business is collections. While there is no sure-fire way to guarantee you’ll be paid on time, or paid at all, for your services, we have some advice on the best practices for collecting payments.

Be Prepared

Contracts are key to safeguarding you against future payment issues. Enlist the help of an attorney when drawing up your customer contract template to ensure you’re not missing anything. Written into the contract should be the billing terms: how to make payments, when they’re due and if there is a late payment fee. These protect you down the line.

Remind Your Client

Send a reminder a few days before the payment due date. This can be done over the phone, but an email or letter is more professional and keeps things on record. You can even draw up a standard reminder letter, so the client doesn’t take it personally. If they miss the payment, follow up and gently remind them that they haven’t paid.

Make Paying Easy

Many PROs are introducing new technologies into their business models. If you haven’t already, look at incorporating mobile device payments or online banking, rather than relying on checks alone. Companies like Stripe, Square, PayPal, and PayAnywhere make it easy to accept large payments from clients on the spot so your employees can process credit card payments with their phones.

Always Remain Professional

Don’t get confrontational. Remember that both of your reputations are on the line. Not paying you can seriously damage their business, but don’t let it ruin yours. Often, there are real reasons for a payment delay. Construction sites and government jobs can take a while to pay out as they balance their books. Be patient, sending professional reminders. You don’t want to regret how you’ve behaved or damage a potential future working relationship.

Collecting Late Payments

Always communicate your billing terms clearly before the client signs the contract. If you have a late payment fee, making sure they know this may increase their incentive to pay you on time. If a client is genuinely struggling to pay, you may offer them the chance to pay you in installments or set up a payment plan.

If They Still Won’t Pay

The last straw should be taking the collection to the next level. If you’ve done all you can, you have legal entitlements to pursue the collection through other avenues. You may wish to file a complaint with the Better Business Bureau, hire an attorney, or go to the small claims court. Another option is using a collections agency to step up attempts to collect, but bear in mind they will take a sizable chunk of the payment. Finally, you can try to file it as a bad debt and get a tax write-off. See the IRS website IRS website for more info on this.

Be prepared, professional, and patient and hopefully you’ll be paid without hassle!

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