I'm going through the paperwork process to seek a judgment in small claims in a neighboring state against a former long time customer who has closed down with no bankruptcy filing and no communication. I'm curious to know how most of you view these scenarios. Is it just cost/benefit or is it personal/emotional? This is an approximate 4K invoice for a business doing 1.5-2 mil a year.
In years past this is the kind of situation I would have just dropped and moved on from. After the joys of the last several years I've recently adopted the attitude of being willing to spend ten to get five and I'm not sure that's the best thing for me and my business. I can't be the only one dealing with more bad debt these days and I'm curious to hear how other owners approach this issue.
(Business and Management Forum)
From contributor U:
Dealing with bad debt is a tough issue. Unfortunately, way back in the past I have been on both sides of this issue. I believe how you handle this is key to being sure you operate in the future in a way that will prevent or minimize your being here again.
My guidelines for this are that you cannot get someone to pay you if they do not have the funds. Determine if they are able or not to pay you, or if they will soon be in a position to pay. Also, what further damage will be created to your business by chasing this debt? Adding wasted time, collection and legal expenses, frustration and distraction to your ongoing work to the current debt is just creating a bigger loss. Is there any hope of doing anymore business, and would you want to? By increasing the others guys expenses, you may simply be making the debt more so uncollectable.
From the other side of this, it is really hard to do what is right and communicate with others, when your business goes south. Often your personal life is shattered along with your business. Your friends get scarce, and all those business people that were always wanting to help you (when you were making money) cannot be found. So maybe giving the other guy, if he is legitimately trying to get things back on track, a break could prove to be better than adding to his problems. However, if he cannot pay because he is making a new boat purchase, that changes everything. I still vote for minimizing any more wasted time or expense.