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Collecting on past due accounts

Discussion in 'Business Operations' started by kagan, Jul 9, 2004.

  1. kagan

    kagan LawnSite Member
    from Florida
    Posts: 6

    I read where one person said his uncollected accounts for last year were 8%. Well, here's a little secret about collecting on old clients who still owe you money. Now a collection agency will charge you anywhere from 40%-60% of the uncollected balance as a fee if they collect the money on your behalf. Let's say an old client still owes you $100. Well, the collection agency will get $40-$60 of that (on avg) as their collection fee. Well, here's the secret. Nearly every courthouse in the US has a mediation division. This is a free service. You simply walk into the office, write down how much the person owes you along with their name and address. It takes < 10 minutes. Your county courthouse will mail a letter to that person indicating that they are requested to appear on xxx date at the county courthouse for mediation. Here's what works...the letter looks very similar to a court summons for small claims law suits. It even states, John Doe vs Joe Customer for xxx dollars in xxx county before the county judge Joe Blow. Most people see this letter from the courthouse arrive in their mail and immediately call with an apology and the check arrives the next day. I've even had people hand deliver the payment with a few hours of receiving the letter. Some of the accounts I collected on were up to 2 years past due. That's unheard of in collections. It's almost impossible to collect on accounts past 120 days even using collection agencies. Again, this is a free service offered through your county and state. If the person does contest the money owed and they show up at the courthouse, you will then meet with a mediator. Takes no more than 30 minutes. This means you and the customer sit down at a table and a mediator sits in the middle and hears both sides of the story. The mediator tries to help reconcile the problem. If it doesn't work, the only other option is small claims court. However, small claims is not worth the cost or hassle for small dollars. With the free mediation service, any amount is worth going through with this process. If the person gets the letter and pays you before the scheduled mediation date, you simply call the mediation office and tell them. They will then close the mediation case.
    I've used this with about 26 former accounts over the last 10 years. Unfortunately in business, we will have clients who don't want to pay for whatever reason. It happens. This is a simple way to give you the edge.
    Now you may be thinking, "I don't want a reputation in the community of someone who takes clients to court". Let me tell you, I have never had any bad press or reports to the BBB. These people owed me $$. It worked and nearly all clients paid and were apologetic. I even had this method featured in an article of Smart Business Magazine. Hopefully, you don't have to resort to this collection method but it's there if you need it.
  2. Trevors Lawn Care

    Trevors Lawn Care LawnSite Bronze Member
    Posts: 1,180

    thats some good info.


  3. MudslinginFX4

    MudslinginFX4 LawnSite Bronze Member
    Posts: 1,170

    Might work in Florida but I'm pretty sure North Carolina doesn't have anything like that. Great information though!

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    In Virginia, anything under $1,000 goes to Small Claims Court. If someone stonewalls me, I call the court, they set up a date and send me the forms. Don't have to pay the $30 filing fee for several weeks yet. Get the forms within a couple days, send a copy to the offending customers ( as required by law) and they usually get scared and pay up. If they dont' pay, they go to court, and when they lose (and they always lose) they owe me the $30 fee as well.

    Looks very bad on their credit report, too.
  5. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Great post kagan !

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