How to Collect Overdue Accounts

Learn how to Collect Due Accounts from Clients Quickly and Efficiently.Hosted by SBTV.com's Legal expert Cliff Ennico .

Hi I’m Cliff Ennico legal editor of SBTV.com with some tips on collecting your overdo accounts. It happens in every small business, you got a costumer that’s been performing for a while the money keeps coming in every month without fail. But all of a sudden the payments start to slows down a bit or worst case the payments just stop coming in and you don’t get any kind of explanation to what’s going on. Sooner or later it happens to every small business owner and you’re going to have developed strategies for dealing with it. Here are some real world tips for dealing with this very unpleasant situation. First of all my first piece of advice when this happens to you, when you’re running your business lose your email. Number one, pick up the phone get in the person’s face. If you have Skype connection with the webcam do that instead let the person see you, let the person hear your voice. A lot of times when people slow down their payments or stopping making payments its genuinely because of a cash real problem. They’re not doing it to single you out or to hurt your business. They’re doing it because legitimately their cash flow has slowed down. And simply not enough money to pay all the debts that are coming due each month. By hearing your voice, by letting them know there’s a human being at the other end of the line that you’re depending on this payment to run your business and also to that you’re sympathetic with that person’s situation it’ll make the conversation a lot more pleasant. It won’t be antagonistic or confrontational. It will be more of a look we both got have problem here, we’re both good people how do we deal with this, how do we move forward. I guarantee by doing that seven or eight times out ten, you’ll be able to work out something with the person that will enable you stay in business and enable that other person to meet their obligations to you. So for example working at a payment schedule or may be agreeing to a longer term of the payment that the person can meet. A human contact is always best in this situation, too many people go directly to email or to nasty attorney’s letters and really all there doing there is turning off what may what was once a good costumer and maybe a good costumer again. If they handled it the right way, always never go directly to confrontation. Try to see, if you can work something out in formally and if that doesn’t work however and it’s time to go legal. And there are two steps to the process. Number one, have your attorney draft what’s called a demand letter. This is a very simple letter so up to two pages long. Most lawyers have standard foliate forms where these they basically says please be advice that are invoice number 1,2,3,4,5 for a $100.00 is now pay as due. Please be advised that interest is a crewing at the rare of MTN percent per annum. And if we are not paid with the next 10 days after you receive this letter we will have no choice but to commence all legal action against you. That’s called the demand letter I actually—we so call those back when I work on Wall Street. We used call those four F letters for fee fie foe fum, I come to get you sucker as we use to call those kind of letters. I have your attorney drafted; have your attorney send it as well. Because letters from a law firm tend to have a lot more impact than letters on just your improvised stationary. And people take it seriously when they see that you actually got in to trouble of hiring an attorney to actually do the demand letter. By all means send in the demand letter what happens if the client doesn’t still respond? These days you really only have one recourse which is to sue in small claims court. And you should not hesitate to do this by the way suing in small claims court is actually a lot easier than you think. I’ve actually done one other segment for SBTV.com on surviving small claims court which you might want to listen to or not I devote a whole chapter to this topic in my new book which is called the eBay sellers tax and legal answer book available where every books are sold. I have a whole chapter on how to survive small claims court. But here in the nutshell is what you do, bring an action in small claims court and always bring it where the client is located. Never where you’re located and there are two reasons for this. When you bring an action against small claims court they serve process on the client. And they do it exactly the way they would do in any other lawsuit. They send a guy around usually it’s a state trooper or a judicial cop who actually goes to the client’s home. Usually while they’re sitting down and eating dinner he’s got a gun, he’s got a smoky the bear hat on and he scares the but Jesus out of everybody, is what he does. Mr. so and so you’re being served with a lawsuit, trust me that gets attention. Nine times out of 10 when they serve process like that, you’ll get a call from the client the very next minute trying to work something out because this client does not want the publicity and the bother of a local small claims court proceeding The 2nd reason why you want to sue somebody with their located and not where your located is because then you can have somebody right in very solid press release and send it to all the local newspapers in the county where this business is located saying local business person sued for internet fraud. And let me tell you something before I was lawyer I was a reporter for a small newspaper I use to kill for stories like that. I was always looking for headlines like that. So don’t do it yourself have somebody close to you write a really solid press release saying that a local business is being sued for breach of contract or whatever and send that around to all the local newspaper in the county where the client is located. Believe me you’ll get some attention. Last but not the least folks and I always have to say this whenever, I talk on this topic be realistic here. If we’re talking about a very small amount of money always keep. And if the client is not somebody you rely on to keep your business going and operational use common sense. There is something that’s more valuable than money believe it or not and that is your time. If someone owes you $25.00 and he’s blowing you off and it’s going to take you five hours to solve this problem and get justice, you got to ask yourself. How much is your time worth? Well I don’t know but I’ll bet you its worth a lot more than $5.00 an hour. Discretion is always the better part of valor, whenever it comes to collecting small debts. Ask yourself how much time is involved here and it’s really worth to go to the bother of going to a small proceeding to collect 25 bucks. Your time in that situation is probably much better spent getting—doing some more work, putting some more things up online if you’re selling stuff online. Doing another deal that will help you make that $25.00 back again in a short period of time. Spending lots of time chasing small debts is almost invariably kind of productive in the long run don’t do it. And by the way the IRS does allow you write off that debts too when they happen. I’m Cliff Ennico for SBTV.com.