The Best Ways for Your Small Business to Recover Payments from Challenging Clients in 2024

As a small business owner, you have many challenges, even in a booming American economy. There are overheads such as rent, salaries, inventory, utilities, and technological upgrades. You must maintain quality control and keep your price realistic. You also must stay ahead of the competition to avoid losing market share.
Despite your best efforts, you may run into a demanding customer. With the competition so tough, many small businesses focus on customer service to develop brand loyalty. However, this can be difficult to do when dealing with a challenging client. There are a few ways your small business can recover payments from such clients. Start by taking pre-emptive measures.

  • Always use a professionally written airtight contract that spells out all the clauses, terms, and conditions, especially when serving a new customer. Such a contract will help you later if there’s a dispute that requires legal action.
  • Add incentives for timely payments such as late fee charges and early-payment bonuses and make sure that the payment terms are shorter. Customers who count dollars and cents are more likely to pay on time to avoid extra charges.
  • Ask for a non-refundable deposit before starting work with a new customer. Such a financial commitment will motivate them to value your business and to avoid unnecessary disputes.
  • Try to maintain a clear record of the communication by using email. In case there’s a disagreement, the conversations between you and your client can be used to clear misunderstandings.
  • Adopt good invoicing practices. Make sure that the invoice is correct and send it on time. Follow up with regular reminders online. Offer multiple payment choices, including electronic options or checks.

Get Professional Help

Statistically, debt grows harder to recover with time. If you feel that your client is not going to pay, then don’t expand your small business’s resources on debt recovery. Instead partner with a debt recovery agency that specializes in collecting debt for small businesses. And when choosing between over 7000 debt collectors in the United States, partner with an ethical debt collection agency.

For example, you can see how Summit A*R can help you using an ethical debt collection approach, by visiting their website and exploring their platform. They take a diplomatic approach to debt collection by treating debtors with respect and avoiding underhanded tactics. Moreover, they don’t demand payment upfront, nor do they ask for a mandatory number of accounts a year from their clients.

They’ve also been in the debt collection business for over twenty-three years, have served clients across a variety of industries, and boast twice the national recovery rate. Keep in mind that business-to-business debt collection requires specialized expertise. The Kaplan Group, one of the leading B2B debt collection agencies, has produced a state debt map resource that highlights each state’s business-to-business debt collection laws, which showcases how nuanced this niche is – and why partnering with an expert is so important.
Here are a few more advantages of partnering with an ethical debt collection agency:

  • An ethical debt collection agency will never threaten or harass your client, misrepresent themselves, or use robocalls
  • Your challenging debtor may turn into your best client if your debt collection agency treats them with respect
  • Ethical debt collectors are usually more effective than debt collectors who take an underhanded approach
  • By partnering with such an agency, you can recover your revenue and preserve your relationships
  • Agencies that break the Fair Debt Collection Practices Act (FDCPA) can find themselves blacklisted or heavily fined
  • Customers can also sue creditors who violate the FDCPA
  • In the digital age, companies that partner with unethical debt collection agencies can quickly find themselves in a PR nightmare

If your challenging customer has skipped town, then a debt collection agency with a resourceful skip tracing department can also help you by finding them, even if they have crossed state lines. In this situation, it’s important to partner with an agency that has an experienced private investigator and understands debt collection laws in different states. Not only can they locate your debtor, but they’ll know how to effectively recover the payment in any corner of the country.

Remember, certain challenging clients can be exceptionally stubborn. Involving debt collection agencies or threatening their credit rating may not motivate them into paying their debts. In such rare cases, you need to hire an agency that has the resources to take legal action. If you wish to educate yourself about this topic you can learn more about business credits here.

Legal action can be time-consuming and expensive. If you need to take this route, then partner with a trustworthy and reputable agency that can conduct a financial investigation of the entity and fairly advise you about the benefits and pitfalls of legal action. Suing a debtor when the probability of winning is low or if they have no assets can further add to your frustration. In this scenario, if you’ve exhausted all possible options, then you may consider returning the account to the collection queue.

Don’t Lose Your Cool

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There’s a lot of pressure on you as a small business owner, especially if your company is new and vulnerable. Every payment, even smaller ones from new clients, counts. When dealing with a challenging customer, it can be easy to respond in kind. However, being rude or unprofessional can be counterproductive. Not only can this make debt harder to recover, but it can damage your reputation or cause legal problems.

  • Avoid shouting at or harassing your client. If your client is shouting, then speak at a lower volume. If your calm demeanor doesn’t help then, then reschedule the conversation if possible.
  • Even if the client is wrong, listen to them. Not only will this help build a rapport, but it may help them relax. Let them know you’re listening by repeating their concerns and expressing empathy.
  • Use this as a learning experience. Improve your screening process, product or customer service if required.
    Instead of wasting your energy on a challenging client, offer a discount to avoid consuming valuable time. If they’re in financial strife, then offer payment plans or remove the late payment fees.
  • Speak to a challenging client as if other customers are watching. Most customers who have a negative experience with a business go on to share it with a dozen others. On the other hand, they’re more likely to share positive experiences.
  • As a small business owner, you have enough on your plate and training an in-house collection department takes resources. Instead, develop an effective collection policy and seek professional help when needed. By learning how to handle challenging clients your business can improve its accounts receivable turnover ratio and improve its profitability.

About Henrietta Milanovska