Collection Downfalls of Small Business Owners and How They Can Avoid Bad Debt and Make More Money

Small business owners sometimes make common mistakes when just starting out, and trying to get paid. Some small business owners depend on that income more than someone who gets a check each week. This is because when you work for yourself, the work and therefore the payments are sporadic.

Small business owners just starting out are sometime so eager to make a sale that they will accept work or an order without getting a signed contract or checking credit references. They just wait and wait to be paid because they don’t want to offend the customer or appear that they NEED the money.

ALWAYS have a written contract ore agreement; you may also want to get half of the money up front with terms regarding the balance very specifically addressed in your agreement. If you can get the other party to sign the agreement, that is even better.

It is worth it to try and collect the money due at first. Make a couple of calls, if promises are made but no payment, think about using a collection service. It shows you are serious and don’t work for free. Word will get around that you mean business.

How can I avoid Bad Debt you ask? There are some steps you can take to avoid bad debt, which results in your making more money with your business. Your company is not protected from bad debt, so you need to protect yourself by:

• Having a sound credit policy and sticking to it
• Getting a signed credit application
• Checking references
• Getting a signed contract or agreement
• Pulling a credit report if possible
• Setting a credit limit.

You can pull credit reports online at KnowX Standard provides access to public records, instantly and easily. Getting started on KnowX is fast, free and easy. Most of their searches are free but there are also some paid searches.

Be firm about being paid from the beginning. If a debtor knows you are serious, they will be more likely to pay. If they had to fill out a credit application and/or contract, it shows you’re serious. If you place accounts for collection sooner than later, that also shows you mean business.

Debtors will know you are serious if:

• They had to fill out a Credit Application
• They had to sign a contract
• They receive invoices right away
• You send your invoices right away, as soon as items have shipped or the work is complete
• You call right away if you don’t receive payment. Don’t wait!
• You gather all the information you can about the debtor
• You are professional at all times
• You are persistent
• You make personal visits when you can
• You offer different payment methods
• You charge a late fee and/or finance charge

Michelle Dunn was a bill collector for over 17 years and started and ran her own collection agency for 8 years before selling it to write and consult full time. This excerpt is taken from her latest release, "Become The Squeaky Wheel, a Credit & Collections Guide for Everyone". To learn more or order her books visit

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