Debt Recovery and the Family Owned Business
We are a family owned business – most small businesses are. We work for larger corporations. Some of our clients are also small businesses and are family owned as well. Simple stuff. Well, it is simple until one of your clients start to owe you money.
Like all businesses we are understanding of clients having short term cash flow issues, you have to roll with the ups and downs of being a small fish in a big pond in the same way as other corporations do. The development programs we work on are usually for startup companies with investors who sometimes use their cash as a means to reward and penalize project progress or delay. It is tough for a lot of our clients and we always do our best to be as understanding as possible.
If a debt becomes delinquent what can you do to recover it? As a small business, the amounts you are owed are generally small amounts. How small – well – certainly less than $250,000. In my mind that number is important as, for us, it is the amount of money that it is not worth going to court over. The cost, both direct and indirect, make restitution through the legal system ineffective for recovering amounts of this value or less.
When a larger corporation owes you less than $250,000 what can you do to recover it? Well, first we consider the nature of the debt.
- Did the client express any dissatisfaction with our service and is non-payment an aspect of a wider contractual issue?
- Has the client paid other people in the same period and not paid you?
- Is the client keeping open communication with you or are they forcing you to chase them for news of payment?
- How long has the money been owed?
Some time ago (in a different life) we used to own rental properties. Our experience of debt collection is that point 3. above is pivotal moment. Once a debtor stops voluntarily keeping you informed of their plan to pay you back and giving you regular updates it is time to start to worry. It is problematic that you have to commit more of your time chasing your debtors for updates of their ability to pay you.
We do not charge late payment fees or charge interest on late payments. We are as understanding and patient as we can be – up to a point.
We have reached this point with one of our clients. They meet all of our criteria for delinquent debt – they have expressed no dissatisfaction with our work and we do not have a wider contractual issue to settle, they have been paying other suppliers, I am forced to chase them for updates and news of their plans to pay us and the money has been owed for a long time.
To be honest, they have paid some partial payments along the way, but there is still a significant amount outstanding and our ability to continue to supply them credit is also limited by our own financial obligations. During this time members of staff in out office has received calls from recruiters on behalf of the client.
Should we use the power of public knowledge to encourage the client to treat us as they have treated other suppliers who have got paid during the period that they have owed us money?
Would going public with this information harm us?
Filing with a court to recover the debt would also make it public, would using social media be any different?
Let us know what you think.