Client Debt Management Tips for Your Business

Do you have a deadbeat client? You don’t have to lose sleep or money.

Here are some tips for client debt management reduction so you can collect what’s rightfully yours.

You need a client debt management reduction plan to deal with those instances when a customer keeps giving excuses or refuses to pay you.

When you’re not sure if your client doesn’t intend to pay you, try the first following ideas. Perhaps there is a misunderstanding or your debtor may be going through rough times and you could loose a potential good client. As your invoices become more past due, you can use more pressure. Here are some helpful procedures to follow:

• You should call the customer directly, instead of sending him/her e-mails, invoices, etc. and create a sense of urgency.

• Be precise with your client. You must give him/her a definite deadline for payment in full.

• You may want to offer your client a payment option: cash or check.

• Also, you could use a third party as an excuse. Tell your client that you need the money to pay one of your suppliers or service providers.

In case these tips to collect your client debt don’t work, then go to the next level:

• Become a nuisance to your client. Send frequent e-mails, letters, faxes, calls, etc., and let him/her know you’re not going to give up easily. This annoyance may be incentive enough to pay you.

Client Debt Management Reduction Services

• After you have exhausted all these resources, you can hire a collection agency (they charge between 35-50% of the amount owed to you but that’s better than nothing) or file a claim in court to get a court judgment against them. At that point you can hire a judgment recovery firm (they do not charge you anything but work on a 50% basis, meaning they will earn 50% of what's recovered, which is also better than nothing and judgments have many more options and are more likely to be recovered than collections).

• Remind your client that the BBB tracks late payments through collection agencies, and this will affect his/her credit.

• When the dollar amount is not too large, small claims court is a great option. You need to file a small claims action for a small fee and the court will set a date to hear your case. Sometimes just filing the case will urge payment. Remember when you file a claim, all legal fees can be recovered - you just add it to the overall total of monies owed.

Now that we’ve covered some ideas to collect client debt, here are some other ones to prevent this from happening:

• Your first step is to do a credit check on your prospective client by calling the accounting office and ask for a list of his/her regular vendors. When this is not possible, ask your client to complete a credit application form.

• Then, you may request a 50% deposit in advance and the balance due upon delivery.

• You can use a check guarantee service. Telecredit charges a small percentage for each check and although they have a monthly minimum, you don’t have to process all your checks through their service.

• You may include a delinquent interest on overdue accounts as part of your payment agreement. This is legal if you include it in your written agreement or credit application.

• When you have doubts about a prospective client, request full payment in advance.

• If you have a client in-take or new client form, ask clients to provide their SSN # (or EIN # if a business), current physical address if different than their mailing address, and a copy of their driver's license or business license. These items will come in handy should you need to proceed with collection or judgment efforts.



Hopefully you won’t have to use any of these methods to collect money from negligent clients. Remember, your best protection is prevention. However when the client can’t or won’t pay, you deserve to collect what is rightfully yours.

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