This post has been republished from the SitePoint Tribune #427. Subscribe to the Tribune today to receive more business tips like this in your inbox, weekly!
In the SitePoint Forums the other day, I noticed artcoder had asked a question that is quite common for business owners: is it worth chasing money owed?
Like most people, I’ve had bad debts over the years. The best way I’ve found to deal with slow or non-payers is to use a system. It doesn’t really matter what your system is — as long as you have one.
Here’s an example:
- Project’s completion: invoice for final payment
- 30 days later: reminder notice
- 7 days later: phone call reminder/request
- another 7 days later: final demand notice with 3 days to pay
- 4 days later: letter explaining how you’ll proceed from here
- 2 days later: phone call to confirm you are now taking further action
Now, your further action could be sending it to a debt collector, asking your lawyer to become involved, or making a small claim through the court system. Whatever it is, just do it and forget about it. You’ll now either receive your money, or you won’t.
The beauty about using a debt collector or tribunal is there will be a mark on the client’s credit history. Whenever they apply for a loan in the future, that mark could well stop them; I’ve heard of people being paid two years down the track, because the client wants a clean credit report to enable them to secure a loan for a house.
Be consistent with your debt recovery, and you’ll have less headaches and more time to devote to doing the important work — the work you will be paid for.
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You’re very correct. But you might consider some acceptable reasons why some can’t pay on time. There are unavoidable circumstances that hindered them to do so. Might suggest to consider this to prevent cutting of friendly relation. Just a point to ponder.
December 22nd, 2008 at 2:32 pm
I was anticipating more information on the 3 suggested further actions. For example, which approach is recommended for various scenarios, what are the costs, what steps are involved, etc. The suggestion to set up a system (good example) and to follow it without making a big deal out it is helpful. Thanks.
December 22nd, 2008 at 11:57 pm
Thanks for the feedback.
Hello yollyP – we’ll always cut some slack for long term great client. But basically the definition of our best client is our most profitable client who pays on time.
If the client can’t pay, for whatever reason, means they’re no longer a good client.
You’re in business to make a profit – not underwrite someone else’s incompetence.
Howdy D9r – it’s difficult to give more detail because things vary so much for place to place. i.e some places don’t have a small claims court process.
Thanks again for the input.
December 23rd, 2008 at 8:12 am
I take it the debt collector, lawyer and small claims also apply with overseas clients? It’s difficult really because I’m a resident in the UK, so what if I have a client who is residing in the US? If that client doesn’t pay up, is the debt collector, or small claims still a viable option if I don’t have a lawyer? Or are there other ways of solving this kind of problem?
January 3rd, 2009 at 5:35 pm