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How to collect past due payments from customers or clients

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If you have extended credit to a client or customer and they are slow in paying off their account, there are a number of things you can do to improve your chances of getting your money back.

Before you extend credit

It important to have a written agreement, signed by both you and the client, before you extend any form of credit to a customer or client. At a minimum, the agreement should spell out specific terms related to the amount owed, the goods or services that are provided and the specific date the amount is due. You should also agree upon the interest and penalties that will occur if those terms are not met.

Tips for debt collection

If your customer or client falls behind in their payment, you should be quick to remind them of their obligation to pay. You agreed to be their vendor, not their banker.

  • Remind your customer/debtor regularly of their payment obligation to you. Send regular account balance documentation or invoice reminders. When times are tough and people don't have enough money to pay all their bills, they will often focus on paying those creditors who are most insistent and persistent about being paid. And many people are unorganized; it is quite possible they've simply forgotten that they owe you money. Regular communication can help you avoid these problems.
  • Communicate to your customer through multiple channels, including: written reminders, phone, email, even texting.
  • Stick to the facts and be tactful. Even if you are frustrated, don't harass or threaten or use foul language.
  • Various rules and regulations exist limiting the use of email, phone contact and sms messaging, with different rules and regulations pertaining to different industries and jurisdictions. For example, the Telephone Consumer Protection Act of 1991 (TCPA) restricts telemarketing activities by defining rules for the use of sms and phone calls in marketing efforts. The Fair Debt Collections Practices Act (FDCPA) restricts actions by collection agencies. Various other regulations may apply depending upon where you live and how you do business. Fewer restrictions apply to individuals and small businesses collecting their own accounts. Many people may be somewhat familiar with the TCPA and FDCP restrictions, yet not know (or care) whether they technically apply to you or not; they will expect the same level of diligence on your part to ensure they are being contacted the 'right way.' Besides, the guidelines specified in the regulations are (mostly) common sense and make good business practice. Successful collection requires you to walk the often thin line between persistent and antagonistic.

Guidelines to remember

Respect customers' privacy

Do not send text or email messages that will be read by anyone other than the person who owes you money. Do not contact any third parties or discuss the debt with anyone other than the person who owes you money. If the party who owes you money is an individual, don't contact them at work. A past-due notice is personal and should only be received, seen and/or heard by the person who owes you money.

Respect Allowable Hours

You should only make phone calls during allowable hours which is defined as between 8am and 9pm by both the TCPA and the FDCPA. Although strict rules don't apply as to when you can send sms messages, consider that many people keep their cellphones near their bed at night, and many have audible 'alerts' set to notify them when messages arrive. Therefore, as a matter of courtesy, it makes sense to observe the same time limitations when sending sms / text messages.

Get Consent

Telemarketing regulations restrict calls to cellphones and use of sms messages because their use often incurs a cost on the receive of the call or message. FDCPA allows the use of such methods if you are granted consent to use the cellphone number for contact. While these restrictions may not apply to you, it's a good practice to update your customer agreement/contract, bill of sale and other documents that capture a customer's cell phone number to state that the number may be used to contact them about the account. Adding this to 'the small print' will cover your bases here.

Stop Contact if Requested

If you send email, text messages or make automated collection calls, your debtor/customer may request that you cease all such contact. The FDCPA requires collection agencies cease contact if requested to do so by the debtor. But even if FDCPA doesn't apply to you, it might be a good idea to go ahead and stop contact anyway.

Consider it like this; if they refuse to even read your tactful reminder of their payment obligation, how likely do you think it is that they'll actually pay you? It's probably best to go ahead and fast-track consideration of your legal options here.