Many first-time business owners are surprised by the
number of concerns that come with running a new company.
You expect to worry about your product,
marketing, and how to hire the best staff.
But, how to collect on debts is rarely one of the first
entrepreneurs consider; perhaps it should be. Because newer
companies often run on very thin margins, and sometimes are forced
to work with other less established companies, who are more likely
to default on debt than established companies, commercial debt
collection can be a huge concern. Here are five things you need to
know about debt collection.
1. Fraud is a common source of unpaid invoices.
Companies donít pay their bills for a variety of
reasons. In some cases, the company doesnít have the
money. In some cases, the company never planned on
paying in the first place. Both businesses and people
can be victims of fraud. Basic research and credit
reports are a cost effective and efficient way of
preventing becoming the victim of an intentionally
fraudulent company. Many
credit reports are inexpensive
and many research methods, such as double checking
addresses and reading reviews on sites like Glassdoor
and the Better Business Bureau are absolutely free.
2. Good contracts can prevent bad debt.
The same way that good fences make good neighbors, good
contracts make good clients. Your contracts should
always be reviewed by a lawyer, and if possible, someone
with experience in collections. The contracts should
include payment terms as well as penalties and fees for
late payments (some states have limits on how much can
be charged in late fees, which is another good reason to
involve a lawyer). The contract should also spell out
what acceptable delivery of the goods or services
involves, to avoid later arguments about whether or not
the job is complete.