Maine-based small business owners are all used to hearing different excuses when trying to collect money owed to their companies. For these delinquent customers, the real objective is often to delay, either until some time further down the road when they will have more cash, or in the hopes that the account will eventually be written off as bad debt.
Industry data shows that the likelihood of collecting a debt goes way down after 90 days. Non-paying customers figure that if they can hold business owners off for a while, they’re improving their chances of getting off the hook. In any creditor relationship, debtors usually have the upper hand because they know when, or even if, they’ll pay. Therefore, they might take steps to avoid a small business owner’s collection efforts.
There is a way to avoid some of this risk. The trick is for the business owner to minimize, or even remove altogether, the risk of loss. They can require the customer, in writing, to be responsible for all related costs if the account is placed in collection or goes to litigation. It’s key to do this before extending credit to new and unknown customers, making sure it’s very clear in the contract. By shifting the cost responsibility to customers at the outset, they will think twice about ignoring billing statements.
To learn more about how to protect a small business from bad debt, meet with Filler & Associates.