Prying money from a client who won't payAsk FSB's tips for collecting what you're owed.Ask FSB
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(FORTUNE Small Business) -- Dear FSB: I own a tutoring service and have one client who refuses to pay for services rendered. He owes me about $2,500. I've spent five months trying to collect, with no luck. What now? - Deborah Puette, Managing Director, The Scholar Group, Los Angeles Dear Deborah: You might try taking your slow payer to small-claims court. In Los Angeles County the most a business can try to recover in any given year is $5,000 total, and your client owes well under that. Filing costs are minimal, and you don't need a lawyer. (You aren't even allowed to bring one to court with you.) For filing details in Los Angeles County, visit lasuperiorcourt.org. If you go this route and the court finds in your favor, you'll be entitled to garnish the defendant's wages or bank account to get your money, assuming you know where he works or banks. The trouble with small-claims court is that for even a fairly simple claim, the whole process from finding and serving your adversary, to collecting on any judgment you may be awarded, can be iffy and drawn out. To trade money for time, you could turn your delinquent accounts over to a collection agency, which will charge from one-third to one-half of the balance due, depending partly on the amount of effort required to get the money. To find an agency, start at the California Association of Collectors' online directory of member agencies. (For information about agencies nationwide, see acainternational.org.) Then, limit your search by asking for references from other business owners. Many agencies specialize in just one type of bad debt, such as delinquent medical bills, so be sure the agency you hire has expertise in your industry or a similar one. Jay Gonsalves, president of AC International and owner of Action Collection Agency of Boston, advises you to ask whether an agency you're considering carries insurance to protect against potential debtor lawsuits against you or the collection agency. If all else fails, Gonsalves notes, you can write bad debts off your taxes: "But you'll still have a loss on the books for that amount, and who wants that?" How do you deal with nonpaying clients? Tell us in our forum. Keeping the debt collector at bay: Ways to fight back against unnecessary calls from collectors Mastering The Nasty Art Of Bill Collecting |
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