Collecting on past-due accounts is not one of the most enjoyable aspects of running a business, but it is often a necessary one. You can make positive steps toward this goal — and avoid additional pitfalls — by following these tips as you attempt to collect on a business debt.
Set the right tone from the beginning.
Debt collection problems can begin long before an account has gone delinquent. However, if you establish strong and binding contracts or that reinforce with your customers the expectation of prompt payment, a party you do business with will get the message that you are serious about collecting money that is owed to you.
Don’t wait too long.
The sooner you begin to work on collecting an outstanding commercial debt, the better your chances of collecting on it. Many things could happen as months and even years pass by, and few of them benefit the creditor. A business that owes you money could leave the state, file for bankruptcy or simply shut down, frustrating your collection efforts or upending them altogether.
Stay on the right side of the law.
Collecting debts is a highly regulated activity. While commercial debt collection is less heavily regulated than consumer debt collection, you must still avoid overly aggressive and even unlawful tactics that could leave you with legal problems while possibly letting your debtor off the hook. Instead of breaking the law, use the law to your advantage!
Mediate before you litigate.
The purpose of mediation is to facilitate a conversation between the parties. The role of the mediator is to listen during the session, ask critical questions to gather facts and understand the parties’ interests to lead the conversation towards an agreement. Many cases can be resolved at mediation without the need for formal litigation. Not only will you find success in collecting on a debt; you’ll also retain — or even repair — solid working relationships with your late-paying customers.
Don’t give up!
While it may be tempting to give up on your collection efforts so you can focus on other aspects of running a business, don’t give up and you may end up with a far better outcome. Selling the debt to a third-party collection agency may only bring you pennies on the dollar, but working with a lawyer who understands the law and has a proven record of success collecting on commercial debts, can increase your chances of receiving the funds you are owed.
For more advice or for assistance with an active collections challenge, book an appointment to discuss your concerns.
About Matthews Law Firm
Since 1989, Matthews Law Firm has served Southern California, providing businesses large and small with personal service and expert advice that address a wide range of complex and sophisticated legal issues related to commercial transactions. If you need assistance writing solid commercial contracts, securing payment on outstanding invoices, or addressing other legal issues related to your business, we’re here to help.