Question: How Do You Handle B2B Collections?I have a nonpaying B2B customer, and it seems that suing or employing a collections agency may cost more than it is worth. Do you have any advice?
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Answer: Adjust Your Model to Pre-PaymentWhen I encountered this issue, I found that debt collection was ineffective, and civil court required too much time. We kept open invoices under control, but our worst year was still a $41,000 loss due to unpaid invoices (with an average invoice amount of ~$400). Ultimately, we switched our model to:
- 100% pay-up-front before starting production, or
- Buy with paypal credit (which puts the money in our hands right away), or
- Submit a state-backed purchase order (primarily used by school districts)