Collecting debts from customers can be unpleasant and can often take considerable time away from the more productive aspects of running a business. Measures can be adopted to prevent problems arising the first place (see above under Granting Credit) and a well-run business will keep copies of any agreements, invoices or other document which show how much money is owed or the time date or circumstances of the debt.
Avoid entering into verbal agreements that might vary the terms on which goods are supplied, including extensions of time to pay. It is far better to have a written record of any agreement so that the business can easily prove any agreed final date for payment or other variation. Another way of dealing with customers who do not pay is withdrawing supply or only supplying goods COD.
Using debt collectors may be an attractive option if you do not have time to focus on debt collection. Debt collectors will generally charge a fee plus a commission of the debt recovered. Subscriptions are also offered for regular debt collection. Debt collectors will usually find out information such as the debtor’s or company’s registered address and will lodge a claim if the matter needs to go to court. The extra cost of debt collection cannot be claimed unless there was an express agreement that the debtor will be liable for the cost of debt collection.
Another option for businesses is to on-sell debts to a third party for collection.
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