What Is Business Debt
What is a business debt? For starters, a business debt is when a business extends terms of credit to another business or customer and they have not paid it back. Many businesses run their operations with debts, because they are dealing with other businesses and they are only able to pay back the debt after they sell the merchandise or product. This is all well and good if the business is doing well, but what happens when the business runs into some trouble?
This is where the collection comes into business debt collections. If a business runs into some trouble or goes out of business, then the money is outstanding in the form of a debt. This debt is owed to the company who lent the merchandise on credit. Remember that this can also be a single person and does not have to be a company. The money is owed and the company does not want to write the debt down, or absorb the losses. If there is a chance to get the money back, and most of the time there is, then the company should try to recover as much as possible. Sometimes you are even entitled to get more than you are owed when you add up interest and late fees accrued over time.
So from here, we have a debtor who has not paid back the money to a business, and the debtor can be another business or a person. There are different approaches to use if the debtor is a business or a person, because their legal rights are different. If it is a person or consumer, then you need to be much more careful due to the Fair Debt Collection Act. Although, if you are the company that is owed the money, then you have more power to get your money back than if you hire a third party (collection agency).
Most businesses go through rough spots from time to time. The economy is cyclical and will rise and fall. With this said, work with the business and do not be too strict with them. You do not want to turn them off from your business because in a year or two they could turn back around and really help your business out. Be patient but stern, and set deadlines. Maybe even setup a payment plan for the debtor.
This has been a short introduction to business debt collection. Good luck with your business and if you are into the collection process, best of luck there too!