3 Ways to Collect Debt from a Small Business

Small businesses rely on a healthy flow of income to maintain their solvency, especially since the Federal Small Business Development Agency reports that more than 50% of new businesses fail within their first 5 years of existence. Debt is often referred to as “debtors” in accounting terms. In a tax agenda, a list of accounts receivable consists of the payments owed to the business. In the case of small businesses, a pending debt can mean the difference between profitability and net losses. There are several things you can do before sending an account to increase the chances of receiving the payment. You must also follow protocols if the debt is not paid for a long period. Debt collection can be a difficult and sometimes controversial process. Read the article below so you know how to collect the debts of a small business.


Method 1
Avoid bad debts

Method 1 Avoid bad debts

 1 List the “expiration dates” of each account you send. Many accounts “expire at the moment of receipt.” You can also use the “15 net days”, “30 net days” or any other period in which you expect someone to send you the payment.

  • Placing an expiration date in an account is often part of the billing cycle of a person or business. If you do not set an expiration date on the account, the business may decide to wait one or two months, especially if the accounts are adjusted.
  •  2 Do not wait 30 days after the date of delivery of the service or the product has been delivered to send the accounts. Leave your accounts every 15 or 30 days. The best thing to do is to be aware of the schedules and monitor the company that owes your money.
  •  3 Communicate with each company. If possible, send each account to the person making the financial decisions and make sure you have your phone number and attachment.
  •  4 Create a debt-handling procedure. It should be easy for the whole company to understand, so anyone who talks to the debtor understands what to ask or do. It determines at what stage actions should be taken, what steps should be taken and what procedure the company should follow after determining that the debtor is trying to prevent payment.

Method 2
Collect debt

 1 Call the debtor to talk about the pending account. Identify yourself and report the reason for your call. Tell the debtor when the payment is due and ask when you will receive it.

  • Don’t hurt the debtor, be straight. Always use a civilized tone and try to express your desire to maintain a positive relationship. You can talk about the consequences later.
  •  2 Call back in 15 or 30 days if the debtor has not yet paid the debt. Ask why the payment has been postponed. Ask if the debtor wants to pay through a payment plan to avoid interest.
  • Most debtors fall into two categories: they may have financial difficulties and cannot currently pay, or they spend monthly payments based on their priority. Try to find out why they don’t pay in a way that isn’t critical or personal, so you can find a solution that both parties agree. However, a business with financial problems cannot discuss its possible lack.
  •  3 Suspend all the services you lend to the debtor. The amount of time it must take before this happens must be set out in the policies of your company. Call them and send them a warning letter before the non-payment service is suspended.
  •  4 Investigate to see if your state allows you to collect interest on the debt. Many recent laws have limited the amount of interest that can be generated, but many are regulated by the state. It begins to charge interest when it is legal to do so.
  •  5 Keep a record of all the communications you have with the debtor. You will need the dates and times of calls, letters and any other communications, should you take legal action. You may also call these letters in the calls you make to the debtor to determine how long the debt has expired.
  •  6 Negotiate with the debtor if you feel it is your only chance to receive payment. Ask how much they can pay or offer discounts depending on the situation. If you know the business avoids payment, it will be less expensive to offer a discount and never trade than to hire a collection agency or a lawyer.
  •  7 Write letters of request for payment. They need to address the issue of the account and include overdue invoices and references to previous communications. Although they should not be directly threatened, the language should refer to increasingly serious actions if they ignore the account.
  •  8 Send a “notice before collection” to the debtor before transferring the debt to a collection service. This notice must indicate which options the debtor has and the date on which he should respond.
  •  9 Pay attention to possible bankruptcy news. If the debtor goes bankrupt, you cannot blame the business for any correspondence. You can send a legal letter stating that you are requesting payment, but the debtor does not have to pay until a federal court determines the terms of payment.

Method 3
Choose a debt collection path

Method 3 Choose a debt collection path

 1 Decide to pass the debt after a professional service. It would be preferable if the debt is large and if you found it would cost you less to hire an agency or a lawyer than to ignore the debt and report it as a bad debt in your tax. Below are other ways in which small businesses deal with debt collection:

  • Pass the debt to a collection agency. Give copies of all previous communications to a trusted agency. You must understand that you will not receive the full amount of the debt. Most collection agencies will give you about 50% of what they have collected from the debtor.
  • Take the debtor to a small claims court if he owes you a small fee, such as US $ 5,000 or less. This type of court was created to prevent too many legal fees being paid for relatively small amounts in dispute. You will have to do the paperwork to submit a smaller action, and make sure the debtor receives a notice. A trial date will be set in which your case will be determined and you will probably only have to pay small fees for the procedures. In the case of Spain, you must propose a payment procedure.
  • Try to make a reconciliation. This is often done in the small claims court. This is useful in the event of a dispute over the amount of the payment and can help you reach an agreement. You will have to divide the cost of a professional reconciler with your debtor.
  • Find an arbitration. An arbitrator is an impartial party who issues a decision on a case. If both parties accept an arbitration, the decision is final.
  • Reports to the debtor to the state credit office. You can decide to take a lawyer to make sure all the paperwork is done correctly. The purpose of this is to place the debt as a negative point on the debtor’s credit record.
  • Make your debtor into a file of defaulters. What will cause a financial closure and a blow to his reputation until he pays the debt.


  • You need to be careful because it is illegal to falsify information, such as a name or business, when trying to collect the debt. Examine the collection rules of your country or state.

Things you need

  • Company policy on debt collection
  • letters
  • telephone calls
  • Records of all communications
  • Interest accrual (if applicable)
  • lawyer
  • Small claims court
  • reconciler
  • referee
  • Report from a credit bureau