I’ve spoken at length in a pair of previous articles about what debt can do to a business (in a two part article, found here and here). But what about the other side of the equation? It’s one thing to be in debt yourself, but what if one of your clients becomes indebted to you? Obviously this is a situation none of us wants to face, but it can, does, and most likely will happen, so you should be prepared to deal with it. But, how? Well, I’ve prepared some tips for you to keep in mind should this unpleasant situation ever arise.
Keep Records of Everything: This should be a no brainer for all of you. I’ve spoken before about using contracts to protect your business, and this is one of the key ways in which they can do exactly that. Use of contracts and proper records of all products, services and funds ensure that you know exactly what is owed to you and when, and will go a long way towards demonstrating that money is in fact owed should you have to take drastic measures and pursue legal means to get what’s owed to you.
Be Patient, Courteous, and Understanding: Let’s face it, we’ve all owed money to someone at one point or another. Situations completely out of our hands can arise, leading to debt. Exercise those customer service skills you’ve been working on, and treat your indebted client the same way you would want to be treated in this situation. Be firm, but fair. After all, it may not be your client’s fault. To paraphrase a popular saying, “stuff happens.” Work with your client to find an amicable solution that works for both of you. If necessary, working out a payment plan is a great solution that ensures you receive all outstanding funds, and your client is able to pay. Only once all avenues of reaching a solution via conversation (or should the unthinkable happen and your client refuses to work with you to find a workable solution) should you proceed on to the following tips.
Use The Legal System: If your client won’t work with you to find a solution to both your liking, you may have no choice but to pursue legal action. This is exactly the kind of situation that Small Claims Court was established for. You don’t need legal counsel, and the fees involved are fairly reasonable. All you have to do is demonstrate that services were rendered or products changed hands, and that money is owed. If you’ve kept proper records and made use of contracts, this should be simplicity itself, and the court will order your client to pay. I must caution you again, however. Legal action is a near last resort. Remember, people talk. Developing a reputation for immediately siccing the courts on any client who misses a payment is a good way to lose business. Only follow this path if no other option is left to you.
There are other options of course, such as collection agencies, but I strongly advise against pursuing them. In the vast majority of cases, simply exercising your better judgement and working with your client to solve the issue is all that will be required to ensure that every penny of your Personal Independent Earnings goes exactly where it belongs, in your bank account.
