Clik here to view.
Money owed: how to recover what is due to you.
As a small business operator, your business lives or dies based on your income including your receivables. As long as your income is above your expenses including your payables, you’re in good shape. When losses are experienced, you’re faced with cutting back on staff, reducing overhead, or selling off inventory. Things are just not looking good for you.
One problem experienced by small business operators is uncollected debt. Specifically, money owed to you by a client for supplies provided or services given. You’ve already extended credit to this customer — now you must find a way to collect on debt that is past due.
1. Final notice. Send a final notice request to your debtor with the bill included. State that the bill is due upon receipt and provide a way for payment to be made immediately. This can include a deposit sent directly to your bank account or a check delivered to your business. Warn the debtor that further action will be taken if payment is not received such as small claims court.
2. Small claims court. If the amount owed to you is small, then small claims court may be the way to go. Courts typically limit claims to $3,000 to $5,000, to as high as $25,000. If you go to small claims court you will have to take time off from your work. You’ll also have to assemble documentation and prove that you have been wronged. Court costs are your responsibility although if you win the defendant may be required to pay expenses plus what is owed to you.
3. Binding arbitration. Perhaps the amount owed to you is subject to dispute. You claim that the service was performed as required; the other party says that you failed to complete your work. In situations where a dispute is involved, an impartial arbitrator can hear both sides and render a verdict. Arbitration can be an affordable option and may be available through your local Better Business Bureau or Chamber of Commerce. Mediation is another option.
4. Collection agencies. Turning over debt to a collection agency is often the action of last resort for businesses. If all other collection methods fail it may be your only choice. Keep in mind that the collection agency will do everything within its power to collect your debt. They’ll also charge you a handsome fee for successfully recouping your loss. Expect that 25 to 50 percent of your debt will be kept by the collectors, leaving you with the rest. Consider this option when you exhaust all other possibilities and when the debt is at least 90 to 120 days past due.
Debt Considerations
While in court, you will learn what assets your client has available. Know that if his assets are small, your chances of recovering anything are also quite small. In this case writing off the debt may be the best decision, allowing you to claim your loss and go on with your business. Discuss this option with your accountant and your attorney.
See Also — How to Kill Zombie Debt
-------------------------------------------------------------------------------------------------------------
end of post idea
-------------------------------------------------------------------------------------------------------------
shop home improvement at our LetsRenovate center
Helpful article? Leave us a quick comment below.
And please give this article a rating and/or share it within your social networks.