As a small business ownerm what are my legal options to collect a debt?

Your future invoices should indicate that upon default you can collect attorney fees.

1) Unless when you sold the merchandise to him, you specifically kept a security interest in it, you may not take back the merchandise. He was right to call the police on you, at least from a legal, if not moral, standpoint.

2) Your only option to collect is to sue him. If you sue and win, you have access to some collections tools, including potentially placing a lien on some of his assets. However, you cannot do this without a lawsuit. You could try suing in small claims court, where you don't an attorney and which is generally faster and cheaper, to reduce the cost of doing this.