Too Many Unpaid Invoices? Factoring May Not Be the AnswerPosted by Factor Funding Co. on September 29, 2014
Despite their best efforts to treat their clients kindly, small business owners are not always afforded the same courtesy. For a variety of reasons, clients who promised payment may purposely avoid paying their invoices after they are billed. A small business owner's invoices can be a valuable asset, particularly when this individual wants to secure financing through a purchase order loan. However, when he or she has too many unpaid invoices, it may be impractical to consider factoring, at least until most of these debts are collected on in full. Rather than let those total slide or write them off altogether, small business owners can use these efforts to collect on what is owed to them and avoid relying on factoring for delinquent invoices.
Be Persistent with Notices
Some clients make the mistake of assuming that a small business owner or an independent contractor will simply accept the fact that they will not pay for their invoices. They believe that these owners and contractors will simply write off the debt or forget about collecting it. However, people who are owed money should be persistent in their efforts to remind the clients that they owe money for their invoices. Business owners should send out letters as often as necessary to show that they are assertive and not likely to let this debt remain uncollected, regardless if they can afford to or not.
Retain Legal Counsel
Business owners of all levels should retain a lawyer if necessary to help them collect on unpaid invoices. Clients who are purposely avoiding their debt may be compelled to pay up when they receive a legal notice in the mail from the business owner's lawyer. A lawyer can also take the debt to small claims court or file other appropriate legal action against the client if necessary.
Along with helping them collect on their unpaid invoices, small business owners can also retain a lawyer to help them draw up a contract to use for future transactions. The contract may contain stipulations like remittance of a certain percentage of the payment upon placing the order and withholding the right to deliver the unfinished product until the payment is received in entirety. The contract can protect the small business owner, as well as the client in case the owner fails to deliver the product in a satisfactory manner.
Use a Collection Agency
Business owners can collect on unpaid debts by turning their invoices over to a collection agency. The agency can pursue collection efforts for a small fee and use tactics that perhaps are not available to the business owner. For example, an agency can make phone calls, send letters and ultimately pursue garnishment of the client's salary or bank accounts until the debt is paid. These tactics often are sufficient to prompt people to pay their unpaid invoices, especially if they want to avoid having the debt reported to their credit file. When the debt is paid to the agency, the money can then be remitted to the small business owner.
Network with Other Small Business Owners in the Industry
Joining a small business trade organization can benefit small business owners who want to network with others in their industry. Rather than go through the frustration, confusion and loneliness that sometimes comes from running a small business, owners can share tips, advice and insight that will prove helpful to others when it comes to collecting on invoices, as well as other business-related matters. They can take comfort that they will be networking with others who share their passion, as well as their concerns, when it comes to running a successful small business.
Small business owners count on their customers to pay for their invoices. When clients default on their obligations, owners can use these tactics to collect on the money and avoid compromising their future factoring capabilities.