As a small business owner, you know your vulnerability to debt collection because of the resources that big companies have access to. Even a few no-payments from a few big clients or a lot of small ones can financially damage your bottom line. To avoid this situation, make sure to know some of the debt collection mistakes that other small business owners make. These include the following:
Failing to Collect Enough Customer Information
If you prefer to provide credit to your customers, make sure you collect and update the right information, so you can trace outstanding debts. You need to have customer contact information like address, email address, phone numbers, and business license information. You must update this information every year.
Because of the demands on your time, you may put off addressing delinquent customers. But, it can be harder to collect when there is too much lag time in addressing such accounts. Credit and collections must be prioritized just like marketing and sales. You must come up with a disciplined process for collections and accounts monitoring and then contact delinquent customers right away.
Failing to Hire a Collections Attorney
If you prefer to collect debts yourself, you must do so for up to 90 days only. The debtor could leave New York and move to another state, go out of business, or sell a property or an asset you could possibly get to recoup the money owed to you. After 90 days, you need to bring in one of the best New York collection lawyers who have experience in small business debt collection. Although there is a cost involved in this decision, the cost will be less than writing off the debt completely.
Not Having Financial Agreements in Writing
A lot of small business owners have financial agreements completed in a nod or handshake. Although this may be a friendly way to do business, operating without a contract can put your company in an unfavorable position. It’s important to have the paperwork to back up your attempts when collecting a debt.
Not Screening Debtors
If you are dealing with big accounts, you must properly screen customers or businesses before you enter a contract with them or extend their credit. Check their credit history to avoid any surprises down the road. It is easy to get a copy of a customer’s credit report from the three credit bureaus. To screen a business, run a credit check through a business credit rating agency.