Your first collection call should remain cordial.  After all, everyone forgets to pay a bill now and again, or runs into a temporary cash flow situation.  The first reminder call is simply that:  a reminder that payment to you has been overlooked.  Make the problem known to the client, and be sure to ask when the customer thinks he might be able to pay you.  If the customer makes it clear that cash is a problem, explore setting up a payment arrangement.  It’s better to get something now with a promise of more later than to get nothing at all.

If no payment materializes within seven days of when it was promised, you will probably make a second collection call.  This time, you will still be polite, but not necessarily as understanding.  Again try to get the customer to commit to sending you something, even if it’s not the full balance due.  You may have to do a third collection call, or even a fourth, fifth, or tenth.  Although you need to remain professional and polite, you will become progressively more stern as you go. 

Before you begin collecting, make sure you set a minimum amount below which you won’t bother to attempt collections.  Pursuing a customer for payment can be an emotional experience, and if the customer becomes belligerent, it’s easy to take the attitude that you will get every last cent due to you, regardless of the cost.  If you set a minimum dollar amount, you keep the decision based on business principals such as comparing the cost of collection to the benefit of gaining such a small amount of money.  Without this barometer, you may base your collection decisions solely on your emotions about the particular client, which may cost you far more than you gain. 

When you have gotten as much money as you think is possible from the client, you may choose to write off the balance, or you may choose to take him to court.  You may sue your client for the money due in your local municipal court if you are unable to reach an amicable solution out of court.  Many courts mandate that the parties first try to reach a solution through mediation.  In this process, a referee is appointed to try to bring both sides to agreement without a court order.  If mediation is unsuccessful, you still have the option of taking the debtor to court.

For small amounts, check into the filing procedures for small claims in your jurisdiction.  Filing fees are usually quite affordable, and you do not need to hire a lawyer to represent you.

Whether you sue in municipal court or in small claims court, the key to winning a judgment is good record-keeping.  Until a case is fully settled to your satisfaction, you should retain the original contract, copies of any bills you have sent, notes from any phone conversations you made in an effort to collect the bill, copies of payment checks that bounced, and any other records pertaining to the debt.  The better records you have, the harder it is for the debtor to assert that the debt is invalid.

In many cases, the other party won’t even show up to court, meaning that you will win a judgment against them without much effort.  You must still do the work to collect the bill, but now you have a court order in your corner, which opens up a number of collection methods to you.  The court order in and of itself may place a lien on the customer’s assets, meaning that if he tries to buy or sell property or get a loan, or in some cases even get a tax refund check, he must pay you first.  You may also be able to garnish the wages of an individual or the cashbox of a business.  The small claims court clerk may be able to advise you of your options, although he won’t be able to provide you with legal advice.

Court should always be your last resort, and you should only attempt to sue a client with whom you have absolutely no desire to do business again.  Legal papers tend to destroy any warm feelings the customer may have once had toward you and your business, so make sure you are not burning bridges you may need to cross over later.  If you are willing to settle for less than full payment, it may be in your best interest to do so, particularly if the debt exceeds the limit for a small claims case.  In many instances, it is more expensive to pay a lawyer to represent you in  municipal court than to accept a lower payment from the debtor.