How to Collect on Non-Paying Accounts

Posted on December 7, 2008 
Filed Under Getting Paid

Lydia asks:

“What’s the best way to collect on an account that isn’t paying?

I made the mistake of trusting a new client, and now it’s costing me money. It’s just a $50 basket, but it’s my money. How do I make her pay?”

I bet that more gift basket designers than you realize have experienced this problem, including me. I once extended a first-time customer credit on a $30 basket for one reason: her telephone tone was forceful, and I allowed her to control the conversation.

After a month of calls, I finally received the $30 payment, and at the same time I didn’t blame her. I blamed myself for not creating a set of rules and following them.

I recommend that you call the client asking when payment will be mailed. She may have innocently overlooked the bill, and since you did not ask for money up front, this is the best way to start.

Next, immediately follow up your telephone call with a bill sent by mail that’s accompanied by the collection letter in Top 10 Letters.

One call is sufficient. If you resort to sending more notices by mail, the final notice is to be included with a letter that implies legal ramifications.

Send the final notice by certified mail. Her signature will prove that the letter was received, which is a necessary court document.

Hopefully, the collection of $50 will not be settled in court, but sometimes this is the only way to receive payment. You might also consider writing the amount off as a bad debt.

Hard lessons are learned in all businesses, but don’t beat yourself up over this. Proceed accordingly, and be grateful that it’s $50, not $500.

Related articles to learn, grow, and profit:

  1. How to Collect Payment
  2. How to Answer the Phone When You’re Not There
  3. Is PayPal Really that Bad?

Comments

4 Responses to “How to Collect on Non-Paying Accounts”

  1. Consuela Greene on December 7th, 2008 9:10 pm

    It’s amazing how timely the issues you cover on these blogs are. For the past 2 months I have been awaiting payment for a $75 basket I did for a general manager at a boutique hotel that he needed for a fundraiser. When payment wasn’t made after a few weeks I called and then emailed him. He didn’t respond immediately. Last week he finally sent me an email apologizing for taking so long. Claims he’s been extremely busy. The check still hasn’t arrived. I’ll never do that again.

  2. Shirley George Frazier on December 8th, 2008 12:03 am

    Consuela,

    It’s amazing how much we learn every day, isn’t it?

    That check will arrive before the New Year, but before then, write your own iron-clad policy to guarantee receipt of payment before the product is delivered or mailed.

    Then, don’t break your policy. If necessary, tell clients that your accountant requires that you collect payment ahead of time. After all, that statement is true. You’re the day-to-day accountant who really does require upfront payment.

    Let us know when the check arrives so that we can all celebrate.

  3. Consuela Greene on December 30th, 2008 2:27 pm

    Shirley,

    Going forward, I am definitely following your advice about writing that policy for upfront payments and not waivering from it. I especially like the strategy of telling the clients that my accountant requires payment ahead of time. It’s an ideal solution.

    FYI – the past due invoice has still not been paid even though he called on 12/18/08 saying he would pay through my PayPal account. I’ll keep you posted.

    Thanks as always for all that you share, Happy New Year.

    Consuela

  4. Shirley George Frazier on December 30th, 2008 10:20 pm

    Consuela,

    I’m unhappy to read that the invoice is still past due. Continue your pursuit while you put your iron-clad policy together.

    Here’s wishing that your New Year starts off with monies from that overdue account.