Introduction
Collecting past due invoices on accounts receivable has become a tricky matter in today’s climate. Business owners are primarily concerned with ensuring that their customers are satisfied with their products or services, but when customers fail or refuse to pay on past due invoices, companies are often left wondering how to collect and what to do next. This is where we come in.
Identify The Debt Type
When a customer doesn’t pay, the first step is to identify the type of debt. This helps in determining the most appropriate course of action.
Bounced Checks or Breach of Agreement
If a customer has issued a check that bounced or is in breach of a formal agreement, the situation is relatively straightforward. You have documented proof of their commitment to pay, making it easier to pursue legal action if necessary. Ensure you keep all related documents, including the bounced check, bank notifications, and the payment terms.
Verbal Agreements and Credibility Issues
Verbal agreements can complicate matters since they are harder to prove in court. If your business relies on verbal agreements, it’s vital to maintain thorough records of all communications and transactions. This includes emails, messages, and any notes from phone calls or meetings. Establishing credibility and demonstrating a consistent pattern of business practices can help support your case if you need to take legal action.
What To Do If A Customer Doesn’t Pay?
Once you’ve identified the debt type, the next step is to take action to recover the unpaid amount.
Drafting an Effective Demand Letter
A demand letter is a formal way to request payment from a delinquent customer. It should include:
- A clear statement of the amount owed.
- The due date and the date when the payment became overdue.
- A summary of previous attempts to collect the debt.
- A deadline for payment to avoid further action.
- The consequences of failing to pay, such as legal action.
Benefits of Demand Letters
Sending a demand letter can often resolve the issue without the need for legal action. It serves several purposes:
- Formal Documentation: It creates an official record of your attempt to collect the debt.
- Encourages Payment: It emphasizes the seriousness of the situation and often motivates the customer to pay to avoid legal trouble.
- Foundation for Legal Action: If the issue progresses to court, the demand letter can be used as evidence of your efforts to resolve the matter amicably.
Navigating Unpaid Invoice Legal Action
If the customer still does not pay after receiving a demand letter, you may need to consider legal action.
Understanding Small Claims Court
Small claims court is designed for resolving disputes involving relatively small amounts of money without the need for a lengthy and expensive legal process. Each jurisdiction has its own limits on the amount that can be claimed, but it generally covers amounts suitable for many unpaid invoices. Preparing for small claims court involves:
- Collecting all relevant documentation (contracts, communications, payment records).
- Understanding the specific procedures and requirements of your local small claims court.
- Being prepared to present your case clearly and concisely.
Hiring a Business Law Firm for Collection Efforts
The world of debt collection and accounts receivable is a highly regulated area of law which requires a keen understanding of both the applicable Federal and State law requirements but also the practical application of those laws and how they affect your communications with a customer that owes you money.
By utilizing an attorney to assist you with your debt collection needs, your company can feel confident that their messaging to customers is legally compliant but also that you have a trusted advisor to call if a case needs to go further for you to collect.
A law firm can:
- Negotiate on your behalf: Lawyers can often persuade customers to pay without going to court.
- File a lawsuit: If necessary, they can initiate legal proceedings to recover the debt.
- Provide legal advice: They can guide you through the process, ensuring you take the right steps and avoid common pitfalls.
Working with a law firm adds a layer of seriousness to your collection efforts and can significantly increase your chances of recovering the unpaid amount.
Conclusion
The attorneys at Romano Parker & Associates can do more than most collection agencies. If letters and calls do not work, our skilled litigators will work with you to draft, file, and secure a judgment in your favor. Our attorneys are also well versed in pursuing post judgment means of collection in the event a balance remains unpaid even after a judgment enters.
The attorneys at Romano Parker have a vast knowledge and proven track record of collection on past due invoices for our clients. We can help evaluate your accounts receivable portfolio and determine the best means forward in terms of getting you paid. Feel free to contact us for a free consultation today.
