If you run or own a business, you may use an accounting method that allows for customers to pay at a later date. This account is known as the “accounts receivable” account. Basically, this account represents the money that is owed to your company from customers that have not yet paid. Having this option is good because it allows customers to pay their bill at a later date (like a credit card). However, problems can arise if customers do not pay their debt for services rendered.
When customers do not pay, you have to try to go through in-house collection processes. You cannot automatically send this person to an outside collection agency and negatively impact their credit report for being a little late. Additionally, depending on the size of your business and the amount owed, it may not be worth the time and money to pursue an account to that extreme level. As such, you have to determine whether outside collection services are needed or are even warranted.
In-house collection processes usually means that you send a late notice to the customer reminding them that their account is due. If this does not work, you may try to call the customer so that they can verbally tell you the situation. If this does not work, another late notice or another phone call may be warranted. However, you have to be sure that your collection attempts to not reach level that could be considered “harassing.”
If you are noticing that the customer is avoiding your correspondences, you have to analyze whether or not to pursue the account further. The amount owed, the likelihood of being paid, and the cost of further collection attempts (whether in-house or outside) need to be factored into your decision. You may find that trying to collect is not worth your time and as such, you will write the debt off as bad debt.
By deciding not to pursue the customer, there are disadvantages and advantages. The most obvious disadvantage is that you do not get paid the amount that is owed to you. Many companies hedge this loss by requiring new clients to deposit a retainer or some other type of deposit as a sign of good faith or willingness to pay the bills. The advantages of not collecting on the debt is that you get to write the debt off for tax purposes, you save time and money by stopping your debt collection process, and you can make more money by using this saved time to help other clients and customers.
Make your decision as to whether to pursue a nonpaying customer. Decide an appropriate amount of time for which to pursue the debt. Once this timeframe has passed, move on with your business and utilize your time for more important purposes. Fire the nonpaying customer and take care of your loyal, paying customers.
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