There are many facets of the commercial collection process that fascinate me. Possibly because I believe the credit-based economy in this great country is based on honorable people who honor their obligations and pay for services they receive. Like most small businesses, I pay for all the services rendered to my company and I expect customers to pay for our services provided to them. I have been in courtrooms in various states across the country for cases which have all been settled before the case is actually tried. I interviewed a commercial collector last year who said, “I love commercial debt. You have a contract, services rendered, an invoice, and a going business refusing to pay.”
It is essential a business recognize a vital reality; if a customer does not pay soon after 30 days, you are now dealing with a customer in name only. If handled properly the customer may become a real customer again; one who pays for their service as opposed to one who does not. In my experience with business to business, the proof of the pudding is the person in charge of paying for services. Just like in consumer collections, most people are honorable in meeting their obligations, have good intentions, but become overextended for some reason. Just like in consumer collections, there are also businesses with the ability to pay but try to evade payment.
As soon as the account is past due the client needs to be sent letters of advancing severity. At a predetermined time, hopefully less than 30 days, it is necessary to notify the old customer his/her account will be referred to a collection agency or law firm. Abide by this commitment and forward the account on the date you stated.
When the time comes to turn the account over for recovery, the agency or law firm will need the details. They will need the signed contract, all the invoices, the amount due along with any interest or late fees and early payment discounts lost. They will also need a dated summary of these events. Preparing this exacting package will take serious time; thus explaining why businesses believe the old customer when they provide assurances of some pending action. This only misleads the business hoping to save the old customer.
If the old customer ignores this letter, the account will require added expense. Agencies and attorneys may work on contingency but both require court costs advanced before a case may proceed. In my experience it is rare to obtain attorney fees. Therefore the account is already worth less, although not altogether worthless. Many businesses are taken advantage of because they believe they are throwing good money after bad.
I have great belief in the U.S. court system and the rule of law. There are new evasion tactics every day, but courts still agree customers should pay for services. Therefore this step-by-step guide will help businesses deal with commercial debt.
Step One
Pre-determine when to send the last letter, preferably before 60 days old, 30 days past due.
Step Two
Create the same letter your attorney will send with the contract, invoices, and a detailed cover letter detailing all dates and interest charges. Demand the full amount or a phone call to work out a payment plan. Provide a final date by which the old customer may call. Explain in the letter you will no longer be at liberty to speak with them after the account moves to your attorney. Send this package to the president of the company by certified mail and regular mail. It seems they don’t collect certified mail except those from the IRS.
Step Three
Abide by what you say. Turn the account over and do not talk with the account after you do. Your attorney will normally advise you to allow them to represent you exclusively at this point.
Step Four
Again provide an absolute drop-dead date for payment or contact in 10 days. If your local lawyer only charges a nominal fee for the letter, allow her to send a similar letter on her letterhead. Empower your attorney to settle for a pre-determined amount, like forgiving interest and late fees. Only accept a payment plan guaranteed with a credit card.
Step Five
If this fails, use a Law Directory to locate and retain an attorney in the county of the corporate headquarters.
Step Six
Expect to pay for court costs to file suit and pay a contingency fee on any amount collected.
Step Seven
At this stage, the account responds. Expect frivolous counterclaims, casting the blame on an employee, vacuous attempts at changing venue, as well as ridiculous settlement offers.
Step Eight
Empower this attorney to accept the full payment, with slight concession for interest and attorney fees if the full amount is paid by the end of the week.
Step Nine
Prepare to go to court on the day of trial. Find someone or something fascinating to visit when you arrive.
Step Ten
Expect a settlement before trial begins, even in the judge’s chambers. The rattling of sabers is over. The weight of your case makes an actual trial absurd.
Step Eleven
Send a thank you letter to the rest of your true customers who pay for the same services.
When old customers provide payment, they are redeemed so to speak. Although in some cases it is wise to obtain a credit card to guarantee payment for future services. Test the credit card for validity. In my experience whether the customer solves the payment with your business, through a collection agency, or after the lawsuit is filed, an all-is-forgiven approach is the best approach going forward.
Comments powered by CComment