Running your own business can be one of the most rewarding experiences of your life. You had a concept, you have the passion, you found the investors, and off you went, building your business brick-by-brick. Your small business may be thriving, but what happens when your loyal customers fail to pay you on time, or at all? While consumer protection laws help shield debtors from harassment and unscrupulous behavior from creditors, your small business isn’t without recourse, assuming you follow the law and procedures put in place. You ultimately may end up having to go to court, and will need a lawyer in the process.
Before you call your lawyer, you should first take all reasonable (and legal) steps to collect from your customer or on your contract with another business. If you’ve completed the work or delivered the product, sent the invoice, and have received no response, don’t panic. Use a measured approach to collect on the account. Start by sending a debt collection letter, reminding the customer or account-holder of their missed payments and providing an opportunity to correct the situation. You can send an initial letter, a follow-up letter, and a final demand letter before escalating further.
Whether or not you hire a collection agency will ultimately depend on your specific situation. While there isn’t a one-size-fits-all approach to using a debt collection agency, be sure the agency is licensed and bonded and operates in compliance with the U.S. Fair Debt Collection Practices Act. Remember, there are many consumer protections in place that stop debt collection agencies from harassing or abusing debtors. Be sure you are aware of these protections or you may be in violation of the law.
A lawyer can help you in a number of ways. First, you can receive personalized help with your situation. A lawyer will be able to explain the proper procedures and help you draft a well-crafted debt collection demand letter or offer other solutions to your issue. This may include visiting the customer personally or filing for a mechanic’s lien or materialmen's lien in certain limited situations. A lawyer may also be able to advise you on whether to use a collection agency or seek a court-based remedy to ultimately collect on the debt, i.e. filing a lawsuit and hopefully receiving a judgment in your favor. A lawyer can also guide you through the process of collecting on your judgment.
If you're a small business owner and need help collecting delinquent accounts, give us a call at 253.858.5434 to see how we can help.