One integral but dreaded part of running a business is navigating collecting money owed from clients that won’t or can’t pay you.
As a business owner, it is essential to find a way to strike the appropriate balance between pursuing the money owed and preserving your image. Many business owners choose not to pursue these clients and write the balances off because they are worried about their business image. You have to juggle being too lenient and being taken advantage of with being too strict and losing good clients.
Here are some tips you can follow to get the money owed while still preserving your business image:
- Have a candid discussion with your client about what is happening in their realm, causing them not to pay. Are they dissatisfied with the services/product?
Are they facing an unexpected cash flow shortage due to no fault of their own?
With the ongoing pandemic, supply shortages, and labor issues, many companies face new and constant obstacles that they are maneuvering through as best they can, but this doesn’t mean they aren’t facing hardships. By having a candid conversation, you may find that there is a simple way to resolve the issue of non-payment and, in doing so, also strengthen your business relationship.
- If you cannot reach some payment agreement, hire a law firm that is well versed in collections who can become your advocate.
By hiring a law firm, you not only save time and effort from having to make attempts to collect, but you also preserve your business image. A good law firm will take the burden off you and begin working directly with your client to resolve the issue. Often, when a lawyer gets involved, a client can suddenly have a change of heart because they know you are serious about collecting.
Your lawyer will be able to communicate with your client about reasonable legal solutions to resolve the matter with and without court intervention.
- Be open to accepting a payment plan or reducing the amount owed.
You should consult with your lawyer about the cost-effectiveness of going to trial and the process and likelihood of collecting even if a judgment is awarded in your favor. If your client does owe you money, obtaining a judgment can be easier than collecting upon it. Collecting can be extremely complex, and there are many rules, time-sensitive deadlines, and regulations to ensure you are following. It is best to retain a lawyer who knows the law and will give you a plan for going forward.
- Ensure the contracts you have with your clients contain a provision for late charges or interest on overdue balances.
Including these provisions will encourage clients to pay so that they don’t incur late fees or accumulate interest on unpaid balances. I also recommend that you add a provision addressing the payment of your attorney’s fees in the event that you do have to file suit to collect an account receivable. It is advisable that you have an attorney review your contracts and draft these provisions for you to ensure they protect your business and are drafted in accordance with the laws of your state.
- Review your business contracts regularly.
As your business grows, what made sense when you first opened may not be applicable now. You should review all of your contracts once a year to ensure they are up to date with the laws of your state. Additionally, you want to ensure that if you do need to pursue a client for non-payment, you are protected and have a solid contract that will be upheld in court.
About Andalman & Flynn Collections: For decades, businesses and professionals have been turning to the experienced collections attorneys at Andalman & Flynn for their debt recovery needs. A licensed collections agency, their experienced team successfully navigates the complex laws surrounding debt collection practices. The firm combines cutting-edge technology with savvy, effective debt resolution methods that result in high success rates and fast recovery times. For more information, please visit www.andalmanflynncollections.com.