Collecting Payments from Debtors

Fotolia_79495533_Subscription_Monthly_M-300x200Any business that deals with customers – meaning all businesses – has customers that are habitually slow to pay for the goods or services that they purchase. Unlike retail transactions such as those that occur at a grocery store, many business-to-business transactions are not immediately completed. Customers don’t necessarily have to pay before the goods or services leave the building. Payment terms might be 30 days net or 60 days net, but the customer has time to pay for what they have purchased. But what can you do when those 30 or 60 days pass by without a payment? And what can you do if that time continues to drag on and months go by without a payment from your customer?

Don’t Delay with Delinquent Customers

There are many reasons – and excuses – for delayed payments or nonpayment by customers. If you invoice by mail, it is possible that the invoice was not delivered, or that it was lost internally at the customer’s business. Depending upon the size of the business, it is possible that no one at the customer’s business knows that a bill has not been paid. Reasons and excuses aside, your business cannot afford to operate without being paid.

One of the best ways to avoid late payments or nonpayment is to be clear on the terms of payment at the beginning of the business relationship. Have a clear and consistent policy on when payments are due and what happens when payments are late, such as warning letters, reminders, and, if necessary, suspension of deliveries. Then, when a payment is late, act quickly to ensure that your customer understands that the payment is late and needs to be made. Because the relationship with the customer is vital, it is typically worth it to find ways to make it possible for the customer to pay what it owes and continue to receive goods or services. It is rarely in either party’s interest to move quickly to suspend deliveries.

There Are Steps You Can Take if a Customer is Late With Payments

Because your business depends upon it, you have to be serious about getting paid. You don’t want to sacrifice business by being overly pushy or aggressive, but you also don’t want to sacrifice your business by being too lenient. Be committed to collecting what is owed to your business. Don’t get angry and don’t make it personal. You want your money, but you want to keep the customer’s business. Options for getting your money include:

  • Offering a payment plan. If a client is seriously delinquent but making late payments, set up a plan for the client to pay the past due amount over time.
  • Threatening (but not taking) legal action. Have your attorney send a demand letter. Offer payment terms, but make it clear that failing to reach and live up to a payment agreement will result in legal action.
  • Taking legal action. Sometimes, you may have to file a lawsuit. You have to consider whether the amount owed is worth the costs of the action and whether a successful action is likely to result in a full recovery.

If You Have Slow-Pay Customers and Need Information on Collecting Payment, Consult the Palo Alto Bankruptcy Attorneys of Structure Law Group to Discuss Your Options

If you are having difficulty collecting payments from customers in the Palo Alto area, you need to know what options are available to you. To get answers to questions about issues surrounding the debt collections, contact the bankruptcy attorneys of Structure Law Group at 408-441-7500 or through our online contact form.

 

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