3 Ways to Collect Debt

july 06, 2020 | smb debt collection
Elderly business owners talking with their attorney

Taking Action to Collect on Debt Owed to You

Your business has sent out an invoice on time to a client but has yet to receive payment weeks or even months after the prescribed due date. You’re past the point of assuming in good faith that it will get paid eventually and have moved on to taking more direct action to collect on the money you’re owed. At this point in time, you have a few different options to go after that money, and while your instinct might be to have your company take care of its own problem, it might not be the option if you want the best chance at collecting on the debt.

Three Alternatives for Collecting Debts

  1. Work the issue internally. You can choose to handle the matter internally to try and collect upon the debt you’re owed. It may seem to be the simplest and most affordable way to handle the issue, but many small businesses fall into the fallacy of believing that, because they’re not paying anything beyond the typical expenses and salary of their daily operations, there’s no cost to taking on a task themselves. Every hour spent and every employee tasked with trying to collect money owed for services or goods already rendered is an hour away from the work at hand, and from helping other customers.

    Collecting debt is also not a task that everyone is suited to, and not the easiest work. Debt collecting requires a tact that is both firm and professional without being too aggressive; you want to make it clear that you expect to be paid what you’re owed, but without unnecessarily ruining what might otherwise be a good future business relationship, provided that payment issues can be resolved. In short, it requires the right kind of person, and it may be the case that you’ve not hired for this particular skill. Rather than trying to fit into a role for which they’re not suited, it might be best to seek outside help in collecting your debt. Fortunately, there are professional options for businesses that need debt collection help.

  2. Hire a debt collection agency. A debt collection agency is an outside firm that will aid your business in collecting on money owed — for a price, of course. Most reputable debt collection agencies work for a percentage of the outstanding amount and don’t get paid until they’ve collected what you’re owed, so there is no fear that you’ll simply be short of even more money. There are of course agencies with less-than-stellar reputations, so be sure to do your research before hiring any debt collection company.

    In working with a good debt collection agency, though, you are availing yourself of more resources, expertise, and tools for getting paid what you’re owed. Debt collectors take over the task of sending demand letters and making calls, and if those fail to work, they can look into a debtor’s finances to determine their ability to pay and even make reports to credit bureaus as to the delinquency.

    However, what debt collection companies cannot do is pass themselves off as lawyers or government agents or threaten or harass in an attempt to force a debtor to pay. Like your business, they’re at the volition of the debtor to pay what is owed, without any recourse to take action beyond what’s permitted by the Fair Debt Collection Practices Act. You’re paying to have someone do a better version of what you’re doing at your own company, with many of the same limitations. 
  3. Hire a debt collection lawyer. Similar to the debt collection company, a lawyer is another outside resource that will cost you money but will offer better odds for success than trying to work a delinquent account yourself. A debt collection lawyer, like a debt collection agency, can take over the work of sending letters and making calls and is similarly versed in how they can and can’t pursue collection under the applicable laws.

    Retaining a lawyer also offers the potential to pursue a legal remedy to the debt, something that agencies don’t offer. The possibility of legal action, along with letters with a law firm’s letterhead and calls from a firm’s personnel, might be enough in and of themselves to compel payment from debtors who know they can simply avoid you to avoid paying. A lawyer can also communicate to the debtor their situation more clearly so that they are fully aware of the ramifications of a small claims case decided against them. And should it come to taking the case to court, you’ll need a lawyer on your side to handle the case and explain any liens or garnishments that result.

Hiring a Lawyer to Prevent You from Making Costly Mistakes

A court case would be a considerable investment of time and money for what might be a minimal return after everything is said and done, so you should make clear to your lawyer how far you want to take the collection process. Having that lawyer can also prevent you and your company from making other costly mistakes.

Outside help might be costly, but it comes with resources and expertise that you can’t easily match in prompting payment on past-due accounts. If you’re interested in talking to a LegalShield lawyer about your debt collection issue, sign up to be a member today.

LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal or medical advice. Please contact a medical professional for medical advice or assistance and a lawyer for legal advice or assistance.

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