How To Recover Bad Debts From Friends

Few things in business are more awkward than having a friend as a debtor who's not paying. The obvious dilemma is which to put first... your business or your friendship?

Now while you might feel stuck between a rock and a hard place the truth is the greatest threat to your friendship is actually turning a blind eye to the debt. Imagine the impact on your friendship if that un-recovered account in some way contributed to your business hitting the wall.

So turning the tables, it's not you but your friend who's responsible for putting both your business and your friendship on the line.

All of which may leave you thinking you're damned if you do and you're damned if you don't. Thankfully, there is a way to protect your business and preserve your relationship.

So if you find yourself in this position, the first thing you must do is either in writing or in person speak your truth. Simply say something along the lines of...

"You know how much our friendship means to me and that I would never do anything to jeopardize it. Seeing as my business is going through a rough patch at present the truth is if I don't ask you to settle your account I'd be putting my business and in turn our friendship at risk. And because I'd absolutely hate for us to fall out over money I'd really appreciate it if you would square me up by the end of the week."

Now so long as you speak your truth calmly and respectfully if they're a true friend they would not take any offense to you asking.

Having now asked for your money back, one of four things will happen.

Obviously the best outcome is for your friend to pay what's owed. Not only is this good for your business it also demonstrates your friendship is actually worth something.

The second possible outcome is that they confide in you that they too are in a financial tight spot and they can't afford to pay you right now. In this instance while it's fine to feel sympathetic the harsh reality is they're putting themselves before your friendship.

The third possible outcome is that they tell you where to get off and refuse to pay. In so doing they've clearly enunciated "Our friendship doesn't mean that much to me. In fact, I'm only pretending to be your friend so that I can take advantage of your good nature." And that's OK. Because at least you now know where you truly stand.

And the fourth possible outcome is that they promise to pay but subsequently don't. Once again by breaking their word they've demonstrated that your friendship is worthless. What's more they've also revealed that they're also in serious financial strife.

In each of these last three outcomes it's clear that you're not going to get your money back on your own. To recover your money and protect your business you need to refer your debt to an external debt collection agency.

Having accepted the fact that you need outside help all that remains for you to decide is whether or not you want to minimize damage to your friendship.

If you do want to try and preserve your friendship then you should seek out a debt collection agency that has what is known as a "Velvet Glove" phase of recovery. Such an approach opens a window of opportunity whereby the collection agency works alongside your debtor in a respectful, assertive yet inoffensive manner. In this 30 day window neither you nor your friend will be penalised with collection agency commissions. Using this approach, if they are a true friend they'll pay up and everyone will be happy.

If on the other hand they've told you where to go (i.e. either of the last two scenarios above) OR they don't pay within the "Velvet Glove" phase then you must adopt a no-holds-barred approach to recover your money immediately. Don't be fooled... under these circumstances they've declared your friendship over and they really don't care if you and your business falls over. With this in mind you have no choice other than go for the jugular using what's known as an "Iron Fist" approach.

Sure, this all might seem drastic but the cold reality is if they were a true friend they wouldn't ask you to risk both your business and your friendship over money. Bottom line: They've set you and themselves up to fail and you've done nothing wrong by asking for your money back.

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