When a large account fails to make timely payments or you have several accounts running behind, it can impact your operations and your ability to take advantage of growth opportunities. Therefore, ensuring that your customers make timely payments and that you act promptly to address any delinquencies is critical to keeping your business running smoothly and profitably.
At the same time, you do not want your key management personnel tied up chasing down payments, and lower-level employees may not have the skills, confidence or influence with the client to get the job done when accounts remain unpaid. When you find yourself in this situation, an attorney experienced in business debt collections can be your best resource.
Prioritizing Business Debt Collections
It may seem natural to pursue the debts that are furthest past due first, or to focus on those with the largest past-due balances. In some cases, that may in fact be the best course of action. However, there are many factors besides balance and days past due that should factor in when determining where to focus your debt collection energies. Some of those factors include:
- History with the client and whether or not you have an ongoing business relationship
- The amount of the debt in comparison with the effort and expense required to collect on it
- The status of the business or individual debtor and likelihood that the person or entity has the ability to pay
- The collectibility of the debt if you were to proceed to litigation and obtain a judgment
In addition to amounts and due dates, you will want to consider how easy or difficult collection will be, how likely you are to be successful, and how the costs of collection might compare with the amount likely to be collected. An experienced business debt collection attorney has the knowledge to make that assessment and prioritize debt in a way that will allow you to minimize costs and maximize revenues collected.
Debt Collection Negotiations
Debt collection litigation will generally not be your first response to delinquent debt. When a customer has failed to make payment, you will generally want to explore other options, such as breaking up the debt into payments. In some cases, you may even want to settle for partial payment in order to close out the account.
However, you do not want to make decisions like this in haste, simply to get some cash in hand. It may be difficult to maintain discipline about collection procedures if you are experiencing cashflow difficulties, and the practical need to get cash in hand will be a factor in your decision-making. But, the decision should be made only after weighing both short-term and long-term costs and benefits, as well as the factors listed above.
When you do choose to negotiate inregard to an outstanding debt, working with a business debt collection attorney offers several benefits. For example:
- The arm’s-length dealing through an attorney can help avoid difficult conversations that could impact customer relations
- The attorney is equipped to address the legal ramifications of any defenses to the debt that the customer may raise
- The attorney is in the best position to assess all relevant factors and advise you as to your best course of action
- Depending on the specifics of the settlement, a written agreement may be necessary
- The attorney will be in a position to follow up on and enforce the agreement if necessary
Business Debt Collections Litigation
If a settlement is not possible or you determine that it is not in your best interest to compromise or delay payment, the next step may be either litigation or alternative dispute resolution. This will depend in part on the terms of your contract with the customer. However, even if you do not have a contract specifying that disputes will be submitted to arbitration or mediation, you and the other party can agree to pursue that type of solution. Often, alternative dispute resolution is less expensive, less time-consuming and less stressful than a trial before the court.
One of our experienced business debt collection attorneys can explain the differences in these types of procedures and help you determine which approach is best. When proceeding to trial, it is important to remember that a judgment is not money–it is simply a court order saying that the other party owes you money. The defendant may simply decide to make payment after a judgment is entered, but in many cases you will be required to pursue other legal avenues to collect on the judgment. This is one reason that you and your attorney may determine that negotiation is in your best interests.
Talk to a Business Debt Collections Attorney
Debt collection is essential to the continuing operation of your business, but so is maintaining focus on your core operations. When you put your business debt collections in the hands of our experienced attorneys, you get the benefit of aggressive pursuit of what you are owed without turning your attention away from the day-to-day running of your business.