This is the post that every coach hopes they’ll never need, but sometimes, it happens: someone signs up for your retreat, program, mastermind, or one-on-one coaching, and then they fail to make payments. Sometimes, they email you and tell you what’s going on, and see if there’s some way that they can still fulfill the financial commitment that they made, just at a reduced rate.
Other times, unfortunately, they just drop all contact and don’t respond to emails–or make any further payments. That’s when it’s time to call a collections agency.
Whoa. That sounds serious.
Calling a collections agency is serious–especially for the person who has decided not to finish making their payments. More on that in a moment.
What most life coaches don’t know is that for you, the life coach? There’s very little for you to do, and getting set up with a collections agency is extremely easy and costs you nothing. Here’s how it works in most cases (of course, check your local jurisdiction for details):
* You get set up with a collections agency. You’ll need to work with one that operates in the country where the person is located. Here’s one U.S. company that I’d recommend: Optio Solutions and a Canadian-based company: CBS Canada. If the person is thinking that they can opt-out of collections because they’re in a different country? Nope. There are international collections agencies, as well–just google it.
* You hand over authority on the account. When you get set up with the collections agency, you are, in some sense, handing the account over to them. This means that the person who didn’t pay you is now no longer not paying “you,” they’re legally not paying “them,” the collections agency.
* The collections agency will categorize their efforts. A “Level 1” collections attempt is going to involve sending certified letters to the person’s last known address. This is a legal first step in most countries, required before any “Level 2” collections can commence. You, as coach? You’re not doing anything other than signing the paperwork. The collections agency is doing the heavy lifting.
* If Level 1 efforts fail, then you legally sign authority to move into a “Level 2” collections attempt. This? This is where it gets serious for the person who isn’t paying–if they fail to respond now, this can go on their credit report and be used as a pathway to putting a lien or garnish on their wages.
Again, you as coach? You’re not doing much of anything other than being in contact with your collections agency and signing paperwork.
What happens if they collect?
If the collections agency collects, you pay them a commission. This is usually between 35-50% of what was owed.
If the collections agency does not collect? You pay them…nothing.
So in other words, if someone has run out on payments, the worst that can happen is that the agency doesn’t collect but the person who didn’t pay receives consequences such as a note on their credit report that they’ve had accounts go to collections. You don’t pay a dime.
The best that can happen is that you’ll get at least 50% of the money that was owed, back. You might be able to expense the collections agency’s commission as a tax-deduction (of course, talk to your accountant about that).
This is scary!
No one feels good about making that call to the collections agency. No one. It’s scary to make the call.
At the same time, the person not paying has a lot of options before anything gets to a point where it needs to go to collections. One of those options is making more measured financial decisions prior to committing to something. Another is needing to say “no” to something else that they want–trips to Disneyland, new Nikes, eating out, moving to a new country, etc.–so that they can honor a financial commitment that they’ve made.
And finally, another option is contacting you and saying, “I can’t pay the full amount yet, but here’s what I can pay.” I wouldn’t personally recommend sending someone to collections if they are staying in touch and doing their best to pay what they can after a financial challenge presents itself. Someone who doesn’t choose to do any of those things isn’t honoring their own personal integrity, nor are they honoring the financial obligation they made to you and the expenses that you might have incurred in including them in your retreat, group, or other offering.
Most people have a mis-perception that if you hire a collections agency, you’re going to go through a lot of hassle and you won’t see the money, anyway. In fact, the efforts on your part will be minimal and there’s always the chance that something will be worked out. You can halt collections efforts at almost any point in the process, as well. Handing an account to collections isn’t about wishing ill-will to someone; it’s about respecting yourself and your business.