In today’s business world, small business owners write off thousands of dollars of unpaid debts due to them. In reality, most of these write-offs occur unnecessarily, and small business owners simply do not pursue avenues available to them to collect these unpaid amounts they have a right to collect. It is important to learn what methods are available to you as a small business owner and how you can collect what is rightfully yours.

Attempt to Settle

Before rushing into court, it may prove to be both time and cost effective to give your debtor an opportunity to settle the matter between the two of you before any third-party intervention is taken. Write a collection letter to your debtor and make sure it includes what the debt was for, the amount of the debt, what methods of payment you accept and where they can send payment. If you are willing to accept an amount lower than the full amount of the debt as full and final settlement, explain this in the letter and set out what amount you will accept as full and final settlement and how long the offer of settlement is valid. Also, if you are willing to accept weekly, bi-weekly or monthly payments from your debtor to pay off the debt, set this out in the letter as well. Ideally, it is wise to offer payment arrangements and attempt to work with the debtor as to what payments he or she can afford, as this may be the only way you will receive any money from that debtor.

Collection Agencies

If your collection letter goes unanswered and attempts to work with your debtor is unsuccessful, the next step is to contact a professional collection agency. Utilizing a third party agency can greatly improve your chances of catching the debtor’s attention, since debtors are normally more than happy to do what they can to avoid a collection agency reporting or bad mark on their credit report. Communication from a professional agency also appears much more formal than your own collection letter and will show the debtor that you are serious about the collection of their debt. Collection agencies will handle the collection of the debt for you, starting with notifying the debtor that they have been retained to collect the debt and setting out payment options in accordance with terms you, as the creditor, have approved and agreed to. The collection agency will also make phone calls to the debtor if necessary to arrange for payment of the debt, discuss payment options and notify the debtor of possible future collection activity and consequences if the payment goes ignored or unpaid. The collection agency will keep you updated during the entire process and advise you of all ongoing activity with the debtor. Keep in mind that even though you have obtained a third party to assist in the collection efforts, you still maintain control over the settlement amount offered to the debtor, the choice of whether to accept a payment arrangement and all other important aspects of the collection. Delegation does not mean you lose control over the collection of your money.

Court Intervention

If the efforts of your collection agency fail and no satisfactory payment arrangement is made, you may want to look into filing a small claims complaint against your debtor. Filing a small claims complaint is generally inexpensive, but be sure to check with your state’s laws regarding the maximum amount allowed for your claim. Anything over that amount is not allowed in small claims court, and must be filed as a suit in civil court. If the amount of your claim is under the maximum amount allowed in small claims court, you can normally find a small claims complaint form online for your state, or visit the court clerk’s office to obtain a complaint form to fill out and file. The key to a successful small claims suit is service. Be sure to use an accurate address of the debtor and have the complaint served upon the debtor via certified mail or sheriff service, depending upon your state’s small claims procedures. If the address is outdated or the debtor is otherwise not served with the complaint, then it is generally impossible to proceed with the suit and obtain a judgment. Likewise, if your claim amount is higher than the amount allowable in small claims court, you can prepare a civil complaint and file it with your court clerk’s office. Again, a current address is key. Service upon the debtor must be successfully completed before proceeding with the suit and obtaining a judgment in your favor.

Don’t just write off a debt that is rightfully due and owing to you and your business. There are many options available to you that may be successful in collecting money from an unwilling customer or client. After exhausting all avenues available to you, persistence may just prove to pay off after all.