Tips for Improving Collections

The need to collect amounts due is a fact of life for every small business person. More often than not, this occurs without any issue. You bill the skater and the skater pays the bill full and in a timely manner. Sometimes, however, this is not what happens. What then? You provide a valuable service and you are entitled to be paid for your time and effort. Here are a few tips that may help you to avoid collections issues and to resolve such issues more efficiently and effectively when they do arise.

1. Determine creditworthiness.  There is a reason why a bank would check your credit score before making a loan. History may provide some guide as to what you can expect in the future. Before agreeing to take on a new skater, you may wish to determine whether the skater has a track record of payment (or nonpayment) with another coach. Of course, there might be many reasons why a coach hasn’t been paid, so this likely would not be the only thing you consider when deciding to coach a skater, but it might be one factor to think about.
              
  2. Establish expectations.  Mutually establishing expectations at the beginning of the relationship can be critical. Make sure that the skater and his or her parents know what you charge, when you expect payments, and any other terms of the relationship that are important. It may be appropriate for these expectations to be reflected in a written contract. If the skater is a minor, the contract will need to be signed by the skater’s parents.
             
   3. Keep good records.  Accurate, regularly maintained records reflecting lesson times, amounts and dates billed, and amounts and dates of payments received will keep you to avoid a lot of headaches. The rink management can help you with this; they will typically know who is on the ice.
               
4. Bill regularly.  Get into a practice of sending out your bills on a regular schedule. A bill that is not sent will not get paid. A bill for a lesson that was given four months ago will often be more difficult to collect.
               
5. Keep an eye on the balance.  Take action before a balance get too high. The bigger the bill is, and the longer it is past due, the less likely it is that you will be able to collect in full.
              
  6. Communicate.  If your bills are not being paid, don’t be hesitate to have a conversation with the skater’s parents. What is the reason for the non-payment? Is there any dissatisfaction with your service? You may be surprised at how often some candid conversation will resolve any issues.
               
7. Be persistent.  If a skater has stopped taking lessons with you, it may be advisable to send your final bill via certified mail, with detail regarding the dates of the lessons not yet paid for, the amount due, the due date for payment, and the requested method of payment (e.g., check, money order, etc.) If timely payment is not received, a letter to the skater’s parents from a lawyer may emphasize the importance of the issue and encourage payment. A lawyer might typically charge $50-$150 to prepare a basic collection letter. Another option may be to bring an action in small claims court. In most states, the court procedures in a small claims court are designed to enable parties to represent themselves. Filing fees for small claims court are generally low. Mediation and arbitration services may also be available, but those will be more costly. A collection agency may be willing to pursue collection for a percentage of any recovery.
               
8. Follow the law.  If you are collecting a debt under a business name, the Fair Debt Collection Practices Act requirement may apply. This website: http://www.federalreserve.gov/boarddocs/supmanual/cch/fairdebt.pdf  provides some basic guidance regarding the FDCPA’s requirements. There may also be laws that govern debt collection in your state that apply. To the extent you have any questions regarding compliance, you should seek legal advice.

Prepared by Gray Plant Mooty, Minneapolis, MN GP: 3816425 v1
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