When trying to collect money from customers, you or one of your employees has probably heard one of the following:
- “The check is in the mail!”
- “Can I call you back?”
- “Why there must be some mistake!”
The immediate objective of many delinquent customers can be summed up in three words: delay, delay, delay. Some of them might hope that, if they hold out long enough, you’ll either forget about the past due bill or write off the account as bad debt.
A rule of thumb says that the probability of collecting on a debt drastically diminishes after 90 days. So, certain customers will play the waiting game, knowing that, with each passing day, their chances improve for getting off the hook.
In creditor-debtor relationships, debtors usually have the upper hand because they know when — or even if — they’ll pay. Consequently, they can take steps to evade or forestall your collection efforts. Is there anything you can do to improve your odds? Yes!
You can gain some leverage by minimizing your risk of financial loss — or even removing it entirely. To do so, simply require, in writing, that the customer will be contractually responsible for all related costs if the account goes to collections or ends up in court.
Discuss contract or invoice language with your attorney before making any immediate changes to how you do business. Your CPA can help you assess your collections process and target ways to better manage accounts receivables.
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