Ask SCORE

                     Don't Delay With Delinquent Accounts

As a small business owner, you do your best to meet your obligations to your customers.  So it’s only natural  to expect them to pay their bills on time, right?

Unfortunately, the answer is not always.  Obviously, prevention is the best way to avoid having to deal with collections in the first place.  Establish a standard payment policy and make your customers aware of it before starting work.  Your invoices should also clearly state when the total amount is due and the fee for late payments.

And once those deadlines pass, you need to take action.

Get the facts.  Don’t assume the customer is entirely wrong.  Contact them by phone or mail and ask politely for an explanation.  It may well be that the invoice has been lost or is awaiting approval.  A customer with cash flow problems may also request extra time.  How you proceed depends on the situation and your experience with that account.  Make sure the customer clearly understands any compromise.  Be flexible, but firm; and don’t hesitate to follow up.

Take stronger action.  If your initial collection attempts fail, it may be time to turn to an attorney or collections firm.

Or let it go.  You may decide the amount of the overdue account does not justify the cost and effort to collect.  If so, write it off as a bad debt and move on.

Don’t make the same mistake twice.  Should customers with poor payment histories approach you about working for them or restoring credit, don’t immediately refuse unless you are absolutely certain they remain bad risks.  Ask them to explain how their situation has changed and decide whether it makes sense to restore the relationship.  As a precaution, insist on stricter terms such as advance payment or cash-only.

For more assistance with collections and credit policies, contact SCORE Rochester.  Seasoned, volunteer business counselors stand ready to provide free, confidential business counseling to small business owners.  Call (585) 263-6473 or visit www.scorerochester.org.