One way small businesses can get slow-paying customers to send payments in on time is to report late bills to the credit bureaus, but this may not be administratively or economically feasible for most companies. The major credit agencies require a monthly subscription and special equipment to format reports. A business can, however, get delinquent payments on a person's credit report for free.
Identification
Any business or creditor can report a late payment or non-payer to the credit bureaus, but the major agencies have stringent reporting requirements. Any company must pay the credit bureaus to the join their reporting service and set up equipment. Even if a business can afford to report to the bureaus, it must also have enough creditable accounts; most bureaus require at least 500 accounts before considering letting a business join their subscription service.
Credit Reporting Services
A small-time lender could pay a third-party credit reporting service company to report bad debts instead of spending time and resources setting up its own system. Credit reporting services can help format data to meet reporting requirements and send it to the credit bureaus on the small company's behalf.
Free Reporting
A company can effectively report delinquent payments to the credit agencies by filing a lawsuit or sending the account to a collections agency. Most small claims judgments are part of the public record, so the major bureaus constantly check public databases for certain types of judgments. Alternatively, a business could sell the debt to a collections agency. Collections agencies often report any defaults to the major bureaus.
Benefits
Regardless of the size of a company, it can always request an application to join a national bureau and see what the agency says, suggests Financial Web. Joining a bureau may cost money, but the company can weigh this against the benefit of giving customers another reason to pay on time. Companies can even use credit reporting as a bargaining chip in debt settlement; creditors often agree to remove a negative item for payment in full.
