In these economic times, horse industry businesses need to make sure they are effectively managing their credit, as well as their client relationships.

Many equine-related businesses owners have occasion to extend credit to their customers or clients. First of all, it is important to get everyone on the same page with respect to billing. “Everyone” includes you, others in your office who have client contact, and the client. For example, everyone who deals with your accounts should know when statements are mailed, when payment is due, and when or if the client may spread out payment over a number of installments. Similarly, your customer or client needs to clearly understand your expectations regarding payment. 

Your spoken words and your actions must match your paperwork and billing terms. This is one of the weakest areas for many horse businesses in debt management. I have seen, for example, many people who believe someone is boarding or training their horse for free in exchange for a commission when the horse is sold, only to receive a bill in the mail months later for thousands of dollars of boarding and training services. When this occurs, there is a much higher potential to really upset a client who believes your rules have changed between what was verbally offered and how they were actually billed. 

The following are some things you can do to avoid having to collect a debt in the first place:

1. Have clear, written terms from the outset.  You need to give your client a written confirmation of the product or service you will be providing before you provide the product or service.   The initial agreement should be signed by both you and the client.  

2. Publish your terms frequently.  Your terms should be published frequently after the original agreement. For example, the payment due date should be printed on each statement.

3. Send out detailed statements.  You should bill your clients at least once per month, and the bill needs to be as detailed as possible. People are more likely to pay a bill and pay it on time when they fully understand all the services that were performed. When a client sees a general entry such as “vet services” on a bill, for instance, when the client had no idea a veterinarian had treated their horse, the client may become suspicious that you are divvying up your vet expenses equally among all clients, whether that particular client received the vet service or not. 

4. Invoice clients on a consistent billing cycle.  Once a product or service has been delivered, invoice the client as soon as possible. Whichever date you choose to send out bills, send one out at least once per month on that same schedule as long as you are providing services or waiting for payment.

5. Encourage prompt payment.  To encourage the prompt settlement of bills, offer an incentive such as discounts for early payments (while always balancing the extent of the price cut with the benefits of an improved cash flow).

For more debt collection tips, continue reading.

Once an account becomes past-due, remember the following key principles for debt collection: 

Start early. A debt is born when your credit terms are breached. If you do not act immediately, your terms are seen as flexible. If you clearly spelled out the consequences of breaching the rules up front, then no one asks why payment has not been made, you cannot expect to get tough later and get away with it. 


Always be the “good guy. Do not let emotions ruin your relationship with your clients. It is possible to be diplomatic while collecting debts. Remember—persistence is everything. Be polite, persistent, and consistent. Leave aggression to the lawyer or collections agency you hand the debt over to after you have done your best.


Debt collection tips:


*Manage debt weekly, if not twice a week. You will lose the upper hand if you only follow up with debtors monthly or less often. 


*Statements should say only “current” and “overdue.” Do not use 30, 60, and 90 day panels, which suggest such periods are normal.


*Instead of asking how much a client can afford, ask how much they are short. Clients will tend to answer more realistically. Depending on how much they are short, you can ask for a payment plan accordingly. 


*A day or two after the payment becomes past-due, call or email the client. Keep following up on a weekly basis.


*When an account becomes 45 days past due, pass it to a third party. Be sure your third party attorney or collections firm complies with the Fair Debt Collections Practices Act (“FDCPA”), a federal law that governs third-party debt collection practices. One such company is GreenFlag Profit Recovery. They help large and small businesses collect accounts as low as $50, and they typically charge a flat fee of about $25 per account, no matter how large the account is. Just be sure to consistently send your accounts out after 45 days. The longer you wait to take action, the lower your chances to ever recover your profits become.