2024 Small Business Debt Collection Options

Picture this: a client pays your small business to do a customized service or create a specific product for them. You pour your heart and soul into this project. But once you have delivered the finished product, the client never pays! You wait a while before sending a few reminder texts, phone calls, and a letter. But it’s no good. The money still doesn’t come in. What can you do next?

It’s time to look into your debt collection options. You need to know the steps you can take to recover the money you deserve for your work. Let’s break down the basics.

Do I need a lawyer for debt collection?

You may need to seek legal help with debt collection issues if you aren’t sure how to navigate these waters yourself. These are some instances in which legal assistance could be useful:

• A lawyer can help you send collection letters. In a collection letter, you can lay out your demands to the client and inform them that they need to pay a specific amount, or else you may take them to court.
• A lawyer may help you make phone calls to the client in a professional manner.
• A lawyer can offer legal advice to answer your questions and help you make sound legal decisions.

Know the differences between collection agencies and lawyers.

You may be asking, “What kind of lawyer do I need for debt collection?” You’ll want to seek the help of a lawyer that does collections work or a collections lawyer that can assist in debt collection. You would hire this type of lawyer for a set hourly fee to help you negotiate and take legal action if necessary. A collections lawyer is licensed to practice law and has a thorough understanding of the legal ins and outs of debt collection.

Unlike a lawyer, you would only pay a collection agency if they succeed in collecting the debt you are owed. Collection agencies are not licensed to practice law and therefore cannot take legal action against debtors. Instead, an agency would perform services such as making phone calls, writing and sending letters, and reporting your clients’ outstanding debts to the major credit bureaus.

Is hiring a lawyer to collect overdue payment necessary?

Not always. Before you decide to seek legal help or to hire a collection agency, you have several options to try first. Some of these tactics might work if you perform them promptly and professionally:

1. Have a contract ready for each client to sign as soon as they request a service. Include details such as payment deadlines, acceptable payment methods, and terms of billing. It’s harder for a client to argue about overdue payments later if they have already signed a contract that laid out the specifics!
2. Make it simple for clients to pay you. When you present each client with their invoice, make sure the invoice lists the exact payment methods your business can receive.
3. Have a plan in place for how to handle late payments. For example, be prepared to make the first phone call within a certain timeframe after the deadline. You could even create a script to follow for each phone call, such as offering to accept a different form of payment, or laying out next steps if the client still refuses to pay.

While you're pursuing unpaid debts, stay professional and polite, but firm in your approach. Make sure not to do any of the following:

• Harass the client with extensive, repeated contact.
• Make long phone calls to intimidate or wear the client down.
• Send demand letters that are unclear in terms of what you need and expect the client to do.
• Use language that threatens the client personally.

Understand how lawyers can help with debt collection.

Lawyers can provide legal advice about the best way for you to collect debt on your own. This may include general legal advice or reviewing documents related to the debt. Lawyers may also write collection letters on their law firm letterhead or make a call on your behalf if necessary. Hearing from a lawyer can get debtors to respond quickly.Need to take a debtor to court? Having a lawyer on your team can help you determine if civil action is the right approach. If it is, they can help with these three important tasks:

1. Make sure your case fits the monetary limits and parameters for the court.
2. File your case in the right court using the appropriate forms and procedures.
3. If you prevail, take the next steps to collect the money from the defendant.

Get legal advice without the huge cost.

Don’t be afraid to seek legal assistance if the debt collection process seems too complex. That’s why LegalShield is here! We offer legal plans to fit the needs of your small business. Our business plans give you access to provider law firms who can help with advice, research, letters, phone calls, document review, collection letters and more. We work hard to make it easy, simple, and affordable to get the legal help you need, when your business needs it.

If your client has forgotten or is refusing to pay the debts they owe you, you absolutely should seek the payment you deserve. A LegalShield provider law firm can assist you with the legal issues that may pop up as you pursue late payments. You don’t have to do it alone!‍

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Pre-Paid Legal Services, Inc. (“PPLSI”) provides access to legal services offered by a network of provider law firms to PPLSI members through membership-based participation. Neither PPLSI nor its officers, employees or sales associates directly or indirectly provide legal services, representation, or advice. Small Business Legal Plans and certain benefits are not available in all states. See a Small Business Legal Plan contract for a specific state for complete terms, coverage, amounts, and conditions. The information made available in this blog is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide a recommendation as to a specific matter. The blog post is not a substitute for competent legal counsel from a licensed professional lawyer in the state or province where your legal issues exist, and you should seek legal counsel for your specific legal matter. Information contained in the blog may be provided by authors who could be a third-party paid contributor. All information by authors is accepted in good faith, however, PPLSI makes no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of such information.