How to avoid unpaid debt and collect what you’re owed

2.5 min read

Having to chase an individual or a business for payment of outstanding debt can be exhausting. Whether you’re selling a used tractor to a neighbour or fresh produce to a customer, collecting payment can get emotional, consuming time and energy.

Pursuing payment: Collecting outstanding debt

While most buyers pay as expected, sometimes bills go unpaid. FCC business advisor Dean Lewko advises that the best strategy is to do everything you can before the sale to avoid dealing with unpaid bills. “If it’s not someone you know and are comfortable with, have them pay up front,” Lewko says.

Prevention vs. pursuit

Advance payment is the safest solution. Ask your buyer to pay through a wire transfer or e-transfer before they take the goods home. If they want to see the product before they pay, have them bring a bank draft or certified cheque. If your buyer refuses these options, consider it a red flag.

Lay out the terms of repayment in a formal written document that is signed by both parties.

If you’re selling a high-priced item and your buyer needs time to pay, consider asking them to allow a credit check. They can write a letter authorizing you to do a credit check through an agency. “Most farmers would think that was reasonable,” Lewko says. This doesn’t guarantee payment, but knowing your buyer has a clean credit history will increase your comfort level.

If the buyer is unable to pay in full upfront, lay out the terms of repayment in a formal written document that is signed by both parties. It will make the following steps easier, should any be necessary.

First, gently remind

If your buyer’s cheque bounces, or if payment is never made, you have options.

Many people that don’t pay bills on time still have good intentions. “Maybe they’re just in a tight financial spot,” Lewko says. If this might be the case, try an informal phone call to remind your buyer of the debt. This could give you an opportunity to revisit the payment plan and set up something that works for everyone. Late payment is better than no payment.

If reminding is fruitless, use the legal system

If one-on-one communication fails, the legal system is your next step. For smaller amounts, you can use the small claims court process without a lawyer. But getting a judge to agree that you’re in the right is not the same as getting a cheque. Enforcing judgments can be the most difficult part of the process.

If the outstanding debt is substantial, hiring a lawyer may be worth the cost. Consider seeking out a lawyer who specializes in debt recovery. An experienced professional may make the process faster and less stressful.

Using the legal system will take time and money, and likely be frustrating. Before you do this, consider the value of the outstanding payment. “Maybe you’re better off just calling it a hard lesson and moving on,” Lewko says.

From an AgriSuccess article by Leeann Minogue.

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