If your customers do not pay your invoices as agreed, you have the legal right to turn the delinquent account over to a collection agency or an attorney. Collection agencies specialize in calling and writing consumers to demand repayment of overdue debts. In many cases, you or the collection agency can opt to sue the debtor and attempt to garnish wages to satisfy the account. But under the federal Fair Debt Collection Practices Act, you and your chosen collection agency must behave ethically when attempting to collect debts.
Write or call the customer or client for a final time before searching for a collection agency. Inform the debtor that if you do not receive payment or reach a repayment agreement, you will be forced to turn the account over to a collection agency; this action can damage a consumer’s credit rating for seven years.
Check with the Commercial Law League of America (see Resources) or your local Chamber of Commerce to find out the names and numbers of debt collectors in your area. Make sure the company is in good standing with the Better Business Bureau; this helps protect your business reputation.
Gather the contact information for your customer and all information about the debt owed before calling or meeting with a debt collection agency. Copy any contracts between you and the customer.
Discuss and agree upon the commission split between the collection agency and you before signing any agreements. Most debt collectors insist on 25 to 33 percent of the monies collected, while some demand a 50 percent cut, according to the business credit bureau Dun & Bradstreet.
Give copies of all relevant documents to the collection agency once you have both signed an agreement. Stop contacting the customer; if the customer contacts you direct him to the collection agency.
Stephanie Mojica has been a journalist since 1997 and currently works as a full-time reporter at the daily newspaper "The Advocate-Messenger" in Kentucky. Her articles have also appeared in newspapers such as "The Philadelphia Inquirer" and "The Virginian-Pilot," as well as several online publications. She holds a bachelor's degree from Athabasca University.