As a company grows, it is understandable that some business owners focus more on generating and completing the work, rather than on pursuing payment for the goods or services provided. Generally speaking, the longer a debt goes unpaid, the higher the likelihood that it will never be satisfied. Having a debt collection policy in place can help to immediately increase your accounts receivables and decrease headaches down the road. The most important part of debt collection is to have a plan and follow it. Here are some tips to help get you started:

Get it in writing.  Place your clients or customers on notice of your payment policy at the beginning of your engagement. Your written contract should set forth your expectation that payment is due upon receipt of your invoice and that interest may accrue if payment is not received. Another provision to consider in your initial contract is a clause to recover attorney’s fees if litigation is ultimately necessary to collect on the debt. 

Letters.  Work with a member of your support staff or bookkeeper to develop a schedule for following up on outstanding invoices. Typically, follow up letters are sent thirty, sixty, and ninety days after a bill is first submitted for payment. Standard form letters can be created and used for different accounts.  If you receive no response to your first letter, subsequent letters should be sent via certified mail to guarantee they are being received. 

Phone calls.   Some businesses may find follow up phone calls or face-to-face meetings useful, especially when there is an ongoing relationship with the client or customer. You may learn that the lack of payment was a simple oversight on your client’s behalf, or gain some understanding about why it has been delayed. Use this as an opportunity to verify or even change the terms of the payments.  It is important to keep communications open. However, a paper trail is also necessary for purposes of documenting your requests for payment, especially if you have amended the terms of your original payment plan. Consider following up your conversation with a letter or email that confirms what was agreed upon.   

Next steps.  If an invoice goes unpaid despite your efforts, your debt collection plan must include a strategy to handle long-term delinquent accounts. Small claims court may be one option for smaller debts. But a more substantial debt will require advice of counsel. If a significant account is delinquent more than ninety days, consider consulting with counsel to determine your next, and best, options. 

There is no one way to implement a successful debt collection policy. The most important part of this process, however, is identifying the past due accounts, and setting up a systematic process for reaching out to collect the payment. Unless a clear system is in place, some past due invoices may fall through the cracks, which will decrease reimbursement and potentially eliminate your legal options for recovery in the future.