As business owners, you understand the importance of accounts receivable. But collecting on commercial accounts can be a tricky business. Do it right, and you get the money you are owed. You might also keep a client who’s just suffering a temporary financial setback. However, doing it wrong can cause legal problems if you violate any debt collection laws.
We recommend you talk to an attorney about your collection efforts. However, this article covers a few tips to help when you need to collect on your commercial accounts.
Start with Your Own Policies for Collecting on Commercial Accounts
Develop strong credit and collection policies. These might help you avoid clients at high risk for nonpayment. Also, make sure your clients fit your business – a coffee supplier might handle collecting on commercial accounts differently than a CPA firm.
Also, have your business lawyer or general counsel review or draft all of your contracts. Make sure all of your client agreements are enforceable. Including provisions that allow you to charge late fees, interest, and attorney’s fees may encourage some clients to keep their accounts current.
Document Everything
Keep comprehensive records about your accounts from the beginning. Don’t wait until you are forced to start collecting on commercial accounts to know where you stand.
When customers fail to pay on time, your records will back up your requests – and then demands – for payment.
Remind Customers When Bills Are Due and Past-Due
Send clear, easy-to-understand invoices soon after work is completed or at agreed-upon intervals. For example, you might need to bill a client monthly for long-term projects or just when a shipment is completed. Keeping it professional can help maintain professional relationships. Clients having temporary financial issues could recover and buy from you for years to come.
Your invoices should state what the invoice covers, how much is owed, and when payment is due. Depending on your agreement with the client, you might mention late fees.
Sometimes simple written reminders are enough to open the client’s checkbook. If not, consider making polite, professional calls to ask about payment. However, remember that you might have to speak to someone in accounting instead of your original contact.
Consider Limiting or Stopping Additional Credit
Sometimes you continue to have an ongoing relationship with a client. However, you could stop allowing them to use credit on future orders. This tactic could keep their debt from continuing to pile up but could also lead the client to look for another company to meet their needs. Weigh the costs of losing the client to the financial pain of not getting paid.
Late-Game Strategies
If all efforts for collecting on commercial accounts fail, you might consider two other options:
- Hiring a debt collection agency, and
- Suing the client.
Either option could mean receiving less than full payment on the debt. However, you may have to resort to such tactics for stubborn clients.
Make Sure Your Efforts for Collecting on Commercial Accounts Are Effective
Send clients professional communications on a regular basis to keep your debt on their accounting front burner. Be clear when demanding past-due payments – about the client’s obligations and eventually what you plan to do to get paid. In some cases, you might offer to settle for less than owed just to make sure you receive something. Compassion sometimes helps if a good client is just having temporary financial troubles, but the future of your business is also at stake.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.