Debt Collection for Small Business Owners

Debt collection is something that most businesses will have to deal with at some point, both large and small. Unfortunately, some customers may struggle with their payments or stop paying them altogether. Due to the pandemic and subsequent restrictions, many people have lost their jobs and practically everyone is feeling the pinch. With such a major economic shift, it’s likely that debt is going to become an even greater issue in the near future.

When it comes to debt collection, there are many things to consider, and this can be particularly difficult for smaller businesses.


When you first approach the customer to ascertain the situation, don’t assume anything. Every customer is different and there are countless reasons for unpaid debt. It may even be a mistake, for example a banking or technical error. Therefore, if you approach this situation with hostility, you may end up alienating a customer who would have continued doing businesses with you. Use this interaction to gather information on the case and document everything carefully.


When talking to the customer about their debt, try to remain calm and friendly in your approach. You don’t want the customer to feel defensive as this could lead to much more difficult situation. Try to ascertain their side of the story and offer to provide further information and any help they may need. When you approach this type of interaction respectfully, it’s much more likely to lead to a positive outcome for both parties.


As already covered, it’s important to be respectful with your clients but you also need to remain professional. Debt is a contentious issue and it can be easy to let your own personal feelings get in the way of your job. Some customers may try to manipulate or lie to you in order to avoid paying back the money they owe. Your job is to collect all the relevant information that you can and use this to decide the best course of action.


Every case will be different but there are times in which a company and customer can come to a mutual agreement. Instead of asking for all of the money back in a single payment, you could offer a manageable payment plan. This way, the company is reimbursed, the customer reduces their debt and you avoid escalation.

Debt Collectors

Unfortunately, there are times in which a business cannot retrieve debt on their own and they have to pass the issue on to a debt collecting agency. As you can imagine, there are countless vendors to choose from and some are better than others. Try to avoid “free” debt collection who use phrases such as “no win, no fee” as these are likely to be too good to be true. It can be tempting to go with the cheaper option but often these services incur hidden charges.

It’s also worth noting that there are ethical considerations. Debt can have a substantial effect on people’s lives and the last thing you want to do is make matters worse by working with a disreputable agency.

As with any service, do your research ahead of time and choose the company with the best track record and positive recommendations.


When it comes to an issue such as debt, communication is key. Whether it’s letters, emails, account updates or phone calls, make sure your customers are continually up to date with the status of their debt. Each time that you reach out to your customers, you’re giving them another opportunity to tackle their debt before it becomes too substantial.

Whilst we are on the topic of communication, it’s worth being aware of a change in the law that came into effect last year. Previously, letters that were sent out to clients contained intimidating content such as capitalised words and legal jargon. This approach was seen as unhelpful as it caused anxiety in recipients and could potentially affect long-term mental health. The new law has basically toned down these communications. Now, letters should be simpler, easier to understand and capital letters are being replaced with bold, underlined typing.

Debt collection can be difficult at the best of times, even more so for smaller companies. However, by following some general advice, you can avoid the common mishaps along the way.