For business owners, having past-due accounts receivable can be extremely frustrating!This is especially true in the early stages of a real estate business or construction business when cash flow may be tighter and you may be relying on those customers' payments to meet your other obligations. At some point, every small business owner has likely asked themselves whether it makes more sense to continue spending time and money trying to collect the money owed, or if instead, it would be smarter just to write it off.
Most of the time, it makes sense to try to collect for a reasonable period of time. Many business owners have found success with the following tactics and tips:
1. Communicate with your clients. It's OK to place a friendly reminder call or to send a letter reminding the client of the outstanding debt. And, the sooner you do this after the debt is past due, the more likely you are to collect.
2. Be willing to work with clients. Understand that your clients may be experiencing a temporary hardship; be open to working out a payment arrangement with them. Any payment arrangements should always be in writing, to protect both you and the client.
3. Hire a collection agency. If the amount owed is large enough and your efforts to collect have been unsuccessful, you may want to consider hiring a collection agency to help you collect. However, this is generally a last resort, as it means you are agreeing to accept just a portion of the total amount collected by the collection agency.
At some point, you may be faced with a decision about writing off bad debt. In that scenario, keep in mind that there are accounting principles that must be followed, so have a discussion with your Phoenix small business CPA about the best way to accomplish writing off the amount owed.
Contact Sean Core CPA PLLC today online, or by calling (480) 626-5043, to learn more about the CPA small business services we offer, including tax, accounting and bookkeeping.
