3 Proven Methods to Get Debts Owed You Paid
I just had a client pay me a somewhat huge amount owed for almost six months. Now, this client is renowned for being a debtor and the smarter thing to do would have been to avoid his business altogether.
However, I was confident I would get paid (I was a little overconfident here and paid slightly for it) seeing as I have a few tricks for getting debts from even the most difficult clients.
These tips work 99% of the time, however, they aren’t easy all the time. Most of the time, you’d still have to jump through some hoops to see them work. The point remains though, that if you are consistent in implementing any of them, you should see them work for you.
I’m going to be sharing each of them here and the instances I applied them. Hopefully, this gives you an idea of the best times to apply them so you get the desired result.
I’ll also recommend you start from the most friendly of them all and use the more stringent ones only if the situation warrants it.
First, I want to point out that you don’t want to use any of these methods unless you have a client or customer that starts to become shady or difficult.
While these methods work, they sometimes strain a good working relationship with the client and you want to prevent this if you can.
That said, here are the three methods for getting your money back each time:
Become a Squeaky Wheel
This, in my opinion, is the most effective method I have found for debt collection. A squeaky wheel will become a small annoyance and start to grate on your nerves after some time and no one wants this.
You would have noticed that if you have a squeaky door hinge or car tyre, this irritation stays on your mind and it becomes a sort of priority to you to get it fixed.
You make plans to have this distraction corrected so things can return to normal. The same is true and applies to the business world.
I have used this method several times with great results. It is my preferred method of choice for debt collection. The first time I used this method was with a client who’d become difficult after our deal had been concluded.
I make bedsheets and beddings as my offline hustle and supply them to large clients. This particular one, a hotelier, needed a change of bedsheets in most of his rooms and had me supply 45 pieces.
My usual policy is to always request a down payment of 50 – 75% of the fee beforehand, that way my business keeps on, and this I did, getting the mobilization fee of 50% from said client. A month later and the job completed, I sent an invoice to my client for my bills, but got no response, not even an acknowledgment of the received invoice.
This silence went on for a few more weeks until I decided to go the hard way.
I went from sending just that invoice, which is usually all that’s needed to get most clients crediting my company for the completed job, to sending a few more then upscaled sending follow-up emails and phones.
When all these didn’t seem to be getting the effect I wanted, I knew I had to intensify my efforts and this is where becoming a squeaky wheel came in.
From weekly reminders, I proceeded to sending daily, and then a few times a day. I also ensured I visited the office a few times.
Was doing all these easy on my part?
No. However, I knew getting the money from this company wasn’t going to come another way and so it had to be done.
During all these though, I made sure to only allocate my free time to these tasks. For instance, I only visited the client’s office during my lunch breaks or at the close of work, that way, my regular work was still getting done.
The client will wear out with time and end up paying you your due.
Doing the entire process of acting the squeaky wheel part, you want to ensure you maintain professionalism and decorum. So, even if it seems hard (you don’t want to create a scene when you show up at the client’s office or call up to issue any threats).
Doing so will only serve to destroy the relationship you have. And for all you know, this client might be delaying in paying up this time due to some financial challenges and not because they don’t want to.
Summary of the Squeaky Wheel Debt Collection Method
Become very visible and be all up in the client’s face so they have no other choice but to pay you up, if only to get you off their back.
Offer a Discount for Some Time
This method is just as effective as the squeaky wheel debt collection method, if not more so. The only reason I would recommend using the other first is that you stand to lose a little bit with this method.
From the name, the discount debt collection method involves offering your client a discount if they can pay up within a timeframe.
Say you invoice your bill to a client and he doesn’t pay up. You send a few reminders and become the annoying squeaky wheel, but this is one client from hell who’s refusing to bulge. What you do next, is suggest a deal he’ll find hard to resist; you offer a discount in percentage if they can pay you within a timeframe.
Most companies would grab this offer, seeing as getting a discount would invariably mean profit for them.
So, you could send a follow-up mail, informing the client that although your agreed bill is $3,000, he could get a 15% off if his company pays before the week runs out.
Research has shown offering discounts to be a very effective sales strategy, especially when tied to a deadline. It is just as effective when used as a debt collection strategy and you should see your client struggling to pay up.
I used this method on a client who’d been owing me for several weeks. She was a friend turned client and against my better judgment, I decided to supply a few bedsheets to her on credit.
She came up with several stories about why my money wasn’t ready: from having customers owe her too, to one of her kids being ill and hospitalized.
In the end, the discount method was one method I felt would be most effective and I was right. She paid up within a few days when I offered her an almost 15% discount which would run for just a week.
Summary of the Discount Method
You offer the client a deal they’ll find hard to refuse; a reduction in the fee to be paid but going for a limited time only.
A little suggestion here:
Looking at the discount debt recollection method, it would seem you would incur a loss at the end of it all. However, here’s one simple trick I always try to implement:
Never let your discount cut into your cost price. You always want to ensure you never fully run at a loss. So, even though you might not be making much in terms of profit, the product cost should be paid up in full.
My discount never goes beyond 15%. Most often, I offer a 5-10% discount and this ensures my production cost is covered and I still get a little something.
Offer a Trade by Barter Arrangement
On the other side of the spectrum is the trade by barter debt collection which no one talks about and not many people use.
This method was quite effective over a century ago before money became the accepted legal tender on February 25, 1862.
What people did was search out brands or companies which had what they needed and then purchased these using a service or product they already had, which the company also needed.
For instance, if you sold books and needed a video game, you would then approach a video game seller to work out a trade by barter deal.
This method worked, however, it was cumbersome as it was difficult to find a person who needed the item you had to trade at that particular time and so it was abolished
This method might no longer be operational, but it doesn’t have to die off completely as you can still adopt it for your debt collection purposes.
So, if you had a client refusing to pay up and they have a product that will come in handy, you could pitch the trade by barter idea to them, detailing the benefits to both parties.
This method is also limited though as the client might not exactly have a product you need or want.
Summary of the Trade by Barter Debt Collection Method
With this method, you don’t lose out (completely) as you get the equivalent of your payment in a product or service rendered.
This strategy comes highly recommended when you are particular about maintaining the relationship with the client.
I have never tried this method personally, however, my husband does often and with such great results.
This method works great if you are in a particular niche and offering services phono
- – Offer to Have Them Reported to a Regulatory Body;
Most industries have regulatory bodies that ensure everyone complies with the policies of that industry.
You want to find out those involving your debtor, what the sanctions are, and the consequences attached for defaulting. If there are, then an effective method for getting this client to pay up could be to send a mail informing them of your decision to report them to the concerned bodies should they continue to ignore your messages?
Depending on how powerful these bodies are and how well-crafted your emails are in conveying your next mode of action, you should get a response back on the new way forward.
Summary of the Regulatory Body Sanction Method
This debt collection method advocates using higher powers to compel your stubborn debtor to pay up.
However, like the previous methods before this, it also strongly supports making your good relationship with this company a priority.
Unless absolutely necessary, you never want to slam any business relationship door on your way out as you might need that same door someday.
- – Go Legal
This last debt collection method should only be used if all else fails. For one, it’s quite expensive going legal; there would be a few fees to pay to see the case through.
It wouldn’t do to spend a lot trying to get your money only to discover your bill is twice the income that came in.
This method should be your last resort as it comes with a few downsides. Besides having to fork out money from your pockets, it is most definitely certain any cordial relationship with this company would cease to exist at the end of it all.