There is a wealth of literature about collecting debts from late-paying clients. And while many of these tips have proven effective in recovering debts, business owners still need to be apprised on how
not to collect payments, probably because most of the guidelines are common knowledge. Still, when they have exhausted all means to collect payments from late-paying customers, some are bound to commit costly mistakes in debt recovery efforts.
Owners of small and medium-scale businesses relying on payments to keep their operations and cash flow healthy should avoid the following mistakes in managing their accounts receivable:
- Incorporating additional fees or hiking up interest: Some business owners who have had enough of their delinquent customers slap on an additional fee or a higher interest, which they deem justifiable given the anxiety and stress they face chasing payments. However, doing so could just exacerbate the problem, with clients completely disregarding the penalties and the debt. It is best for business owners to adhere to their collection policies and terms no matter what.
- Letting emotions get in the way: Business owners who tirelessly reach out to late-paying clients will at some point get frustrated. And when emotions run over, a host of new problems is likely to emerge. For example, a frustrated business owner who has to make the nth collection call could resort to threatening or harassing a client just to get payment. Doing so, however, could translate to legal woes that could be detrimental to the health of the business.
- Waiting too long to contact a collection agency: If a business owner has exhausted all means to recover payment and still fails to collect, it is now time to hand over the responsibility to professionals. A collection agency like Brennan & Clark LLC can design a strategic plan that will maximize the chance of recovery.
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