Regardless of how a customer’s debt became overdue, small businesses need to use documentation, diplomacy, and if necessary, a judgment, to collect what’s owed.

Get customers’ information up front. Della Clark, president of The Enterprise Center, a minority business incubator in Philadelphia, says the first step in resolving a debt problem is to verify that there’s no confusion over what the client needs to pay.

“Make sure the customer has signed off on the scope of services you’re providing,” she says. Depending on the product or service you offer, that means having a well-drafted contract or clear terms of sale.

“If you use invoices, send them out in a timely manner, and include a due date,” adds Harrrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service. “If you accept checks, record the [check writer’s] driver’s license number. With that number, you can report bad checks to the Chex system.”

Appeal to your business relationship. If you find that a customer is slow to pay, try to resolve the situation cordially. Be nice.  “When someone gets in a cash crunch, they tend to pay the relationship that’s most important to them first. You want to be high up on that list,” Clark says.

“Smaller companies are usually different from larger ones in that they have to depend more on their relationships with their clients. While they may still have the option to sue, it’s probably more important for them to preserve the relationship,” says lawyer Maureen Wood, a founding managing partner at Wood & Wood L.L.P. in Conyers, Georgia.

“To keep the relationship, start reaching out and sending letters to your client asking them to give you a call if they need to make payment arrangements. Try to keep that personal connection,” she says.

Use a collection attorney or reputable debt collection service. If the customer is still not able to pay, consider hiring a collection agency or attorney to collect the debt on your behalf, Clark advises. “The cost of a collection attorney can be anywhere from 20% to 50% of the outstanding bill, but it’s negotiable. The older the debt, the more the collection services will want,” she says.

One advantage of hiring a collection agency or attorney is they have the ability to put the outstanding debt on the debtor’s credit report, Wood says. As with any professional, be sure to get recommendations and check referrals before hiring them.

Go to court. If the other solutions don’t work, you could sue for the money you’re owed. However, know that even if you win, you still have to take steps to actually collect the money, Wood says.  “You have to enforce the judgment.”

This may involve garnishing the person’s wages or placing a lien on their real estate property. Exact details vary by jurisdiction, but expect to spend at least a little more time and money before collecting your payment.

Dealing with bad debt isn’t fun, but if your customer has an overdue bill, make sure you know the right steps to receive what you’re owed.

In our final installment, Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, offers some great books and Web resources to check out before you decide to invest your money.

BlackEnterprise.com: For young women who’d like to learn about real estate, stocks, and other investment opportunities, what books and online educational resources would you recommend?

Web Resources

Morningstar.com

Wisewomeninvestor.com

Allbusiness.com

Girlscouts.org/moneysmarts

Italladdsup.org

Books

On My Own Two Feet: A Modern Girl’s Guide to Personal Finance by Manisha Thakor

The Savvy Girl’s Guide to Money: The Savvy Way to Have the Life You Want by Emily Chantiri

Kiplinger’s Money Smart Women: Everything You Need to Know to Achieve a Lifetime of Financial Security (Kiplinger’s Personal Finance) by Janet Bodnar

Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding Your Dreams by David Bach

The Money Book for the Young, Fabulous & Broke by Suze Orman

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: At what point should a woman consider getting a joint account with her partner? Should she consider doing so even if they are not married?

Harrine Freeman: A woman should never consider getting a joint account with her partner, not even if she is engaged. You should only consider getting joint accounts when you are married.

This can save you a lot of heartache and ensure that your credit remains in tact. You can’t control what someone else does or how they spend their money, you can only control yourself.

If you are an not married, follow these four tips:

–You can help out your partner but don’t take on their financial burdens.

–Don’t cosign a loan for your partner even if you are engaged.

–Determine how expenses and bills will be handled.

–Don’t get joint accounts.

If you are married, follow these four tips:

–Examine each other’s spending habits and work towards a compromise.

–Don’t assume your future spouse wants to pay your debt.

–Be honest about your financial situation.

–Don’t keep secrets regarding your finances or purchases made. Develop a plan to resolve the issue.

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: In terms of children, what are some good ways to stay out of debt and prepare for their future? How can women help instill financial responsibility values in their children?

Harrine Freeman: There are several ways women can stay out of debt and prepare for the future of their children.

–Eliminate the “I want my kids to have everything” attitude. Don’t go into debt buying your children everything you didn’t have as a kid or because of guilt that your children don’t have what other children have.

–Buy items on sale or shop at discount stores.

–Check the local newspaper for free activities to find fun and creative ways to spend time with your children.

–Buy in terms of needs versus wants so you do not live above your means.

Women can instill financial responsibility in their children in the following ways:

–Show your children how to budget money and save.  Explain to your children how you pay bills and how you make sacrifices to buy items for them or to pay for an unexpected expense.

–Take your children to the grocery store or department store and show them how much an item costs and how you determine if you can afford to purchase the item.

–Take your children to free financial seminars so they can learn the benefits of financial responsibility.

–Use resources and tools such as the Federal Trade Commission’s YouAreHere or the U.S. Treasury’s site for kids. The Cashflow 101 board game and books such as Rich Dad Poor Dad for Teens by Robert Kiyosaki or It’s Not What You’ve Got by Wayne Dyer are also good resources.

–Provide examples to your children of other children who are entrepreneurs or investors and the steps they took to achieve their goals.

–Get life insurance for yourself and your children to at least cover burial costs.

–Purchase health insurance for you and your children. Purchase disability insurance so if you become ill and are unable to work, you can still pay your monthly bills and expenses.

–Set financial goals for yourself and your children such as preparing for your children’s college education, purchasing a home if you are not currently a homeowner, and paying off your mortgage.

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: If your credit is in arrears, what are some good tactics when negotiating with creditors?

Harrine Freeman: Negotiating with your creditors is a key factor in ensuring you retain a good relationship with your creditors, and it helps to maintain your credit rating. Here are seven tactics to use when negotiating with creditors:

Be honest about your financial situation and assure your creditors that you want to pay back the debt owed.

Set up payment plans for each creditor for an amount you know that you can afford to pay each month.

If you feel you will make a late payment, contact your creditor immediately to set up payment arrangements.

You can request a financial hardship arrangement if you are unable to pay the minimum monthly payment. You can also ask for a temporary halt of payments, a lower interest rate (rate reduction), or a lower minimum monthly payment. You can request that late or over-the-limit fees be waived during the payment period.

Follow-up all conversations in writing to confirm payment arrangements and all verbal conversations. Request a confirmation letter in writing to confirm the payment arrangement start date, end date, and payment terms.

Once the debt is paid, request that the creditor remove the delinquent debt from your credit report. This will increase your credit score.

If you are unable to get assistance with your delinquent account, ask to speak to a supervisor or call back and ask to speak to one to get assistance.

If you are unable or don’t feel confident negotiating with your creditors, contact a credit counselor to help you with the negotiations.

Over the next two weeks, we’ll have money management tips and strategies from Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit counseling service.

BlackEnterprise.com: How can women begin to maximize their salary and financial earning potential to pay off debts?

Harrine Freeman: On average, men were paid more than women for the same or similar jobs. For every dollar a man earns, women get paid 77 cents. To help change the pay discrimination, women can write Congress to ask them to support the Lilly Ledbetter Fair Pay Act to provide equal pay for women.

Further your education and income potential by obtaining at least a bachelor’s degree. If you can afford it and have the time, get a graduate degree or a few certifications related to your specific job industry. Women with a bachelor’s degree earn $1 million over their lifetime, and those with a master’s degree earn $2.5 million over their lifetime. Women with a doctorate or other professional degree (law, medicine, etc.) earn $4.4 million over their lifetime.

Here are five steps to help maximize your salary:

–Consider changing departments or employers to increase your salary.

–Ask for raises, volunteer for high priority projects, develop a career plan with your supervisor, and discuss the contributions you wish to make to help your company grow.

–Temporarily reduce or stop 401(k) deductions to gain extra money to pay down debt.

–Reduce tax withholding for three to six months, and use the extra money to pay down debt.  (Remember to switch your tax withholding back to your original deductions to prevent owing taxes at the end of the year.)

–Pick a career that has growth potential.

Previously in the series: Women & Money: Adequate Budget Management