If you're a small business owner and you have good customers who've encountered financial difficulties or client invoices that are substantially delinquent, unpaid accounts can damage your cash flow and your bottom line. Bills that go unpaid due to customers who simply ignore invoices are unfortunate, common occurrences in every business’s accounts receivable department, but how do you know when it is time to take legal action to recoup your losses? Contact us when you come to any of these points in your collection attempts:
IS THE DEBT LARGE ENOUGH?
While you can legally sue for most amounts, the actual amount owed should be worth the time and cost of hiring a lawyer. The debt should be a significant enough amount to make a difference in your account receivable totals. Suing a client for a $100 invoice is better left to small claims court, and is likely not cost-effective nor worth the legal battle.
HAVE YOU MADE REQUESTS AND BEEN IGNORED?
Have you already tried to collect the unpaid amount by sending past due invoices and demand letters? If you have made an effort to collect and are either being ignored by the customer or the client makes arrangements, but never pays, you should consider proceeding with a lawsuit. Your lawyer can take control of all unpaid accounts and the collections process through the legal system. This will alleviate stress on your bookkeeping team and allow them to focus on the customers that pay on time and in full.
DO YOU HAVE MULTIPLE ACCOUNTS IN COLLECTION?
While it is not required to have multiple delinquent accounts in order to hire a lawyer, having many unpaid accounts could be a sign of trouble. When the amount of past due invoices piles up, we recommend that you hire a lawyer to not only manage collection of these debts, but to correct possible problems.
If you have contracts with your unpaying clients, have a lawyer review these contracts to verify you are not inadvertently creating payment issues with your terms. Hiring a lawyer to manage unpaid accounts can allow your staff the time and resources to examine current processes and make changes where necessary.
If proceeding with a lawsuit for debt recovery, it is essential that you hire a lawyer experienced in debt collection. There are complex procedures and privacy laws surrounding debt collection. A lawyer experienced in this area is accustomed to navigating the legal system and understands the best way to recoup your funds from delinquent clients.
If your small business is overwhelmed by high outstanding client balances, or multiple customers who refuse to pay invoices on time or at all, we can help. Contact us at 253.858.5434 to learn more about your options.