Every successful business will have a certain percentage of customers who do not pay their bills in a timely fashion. Most business owners would prefer that all customers pay within 30 days; after all, if your customers do not pay you, how are you going to pay your bills? Reliable and predictable cash flow are central to the successful operation of any business enterprise.
It has been our experience in many collection assignments we have handled that a certain percentage of them cannot be resolved without resort to litigation. Successful business people, however, know that litigation is best avoided if other approaches will enhance the likelihood of getting your customers to pay. Further, properly documenting communications between supplier and customer before institution of litigation can be critical to collecting successfully in the courtroom.
If you are seeking to collect a business debt in the courtroom, arbitrators, judges and juries are much more likely to be sympathetic to your plight if you can show that you have made a good faith effort to collect the debt by communicating with your customer, preferably in writing. The typical pattern for an unpaid debt starts out with a bill that is not paid within the agreed time. The following monthly bill may go out with a “Past Due Notice” stamped on it. Possibly a “Final Notice” will be sent after that. While this scenario may seem typical, it may not be the most effective way of getting paid. Sometimes a more personal approach can increase the odds of getting your tardy customers to pay up.
We recently encountered an approach where a creditor followed up the first past due notice with a rather personal letter stressing the value of the customer relationship and the importance of receiving prompt payment from customers so that others in the economic chain could be paid. Sometimes customers need to be reminded that your ability to deliver prompt service and good prices is directly related to their prompt response to invoices. Obviously, prices go up and services decline when cash flow gets tight. By personalizing your collection efforts rather than sending “cold” past due notices, you may find that your percentage of past due accounts declines.
In the end, even if a personal approach to collections does not work, it is good evidence in a subsequent court proceeding that you have been reasonable and fair with your customer, enhancing your chances of success in recovering through the court system. We recommend this approach as an enlightened solution to a nagging business problem.
It has been our experience in many collection assignments we have handled that a certain percentage of them cannot be resolved without resort to litigation. Successful business people, however, know that litigation is best avoided if other approaches will enhance the likelihood of getting your customers to pay. Further, properly documenting communications between supplier and customer before institution of litigation can be critical to collecting successfully in the courtroom.
If you are seeking to collect a business debt in the courtroom, arbitrators, judges and juries are much more likely to be sympathetic to your plight if you can show that you have made a good faith effort to collect the debt by communicating with your customer, preferably in writing. The typical pattern for an unpaid debt starts out with a bill that is not paid within the agreed time. The following monthly bill may go out with a “Past Due Notice” stamped on it. Possibly a “Final Notice” will be sent after that. While this scenario may seem typical, it may not be the most effective way of getting paid. Sometimes a more personal approach can increase the odds of getting your tardy customers to pay up.
We recently encountered an approach where a creditor followed up the first past due notice with a rather personal letter stressing the value of the customer relationship and the importance of receiving prompt payment from customers so that others in the economic chain could be paid. Sometimes customers need to be reminded that your ability to deliver prompt service and good prices is directly related to their prompt response to invoices. Obviously, prices go up and services decline when cash flow gets tight. By personalizing your collection efforts rather than sending “cold” past due notices, you may find that your percentage of past due accounts declines.
In the end, even if a personal approach to collections does not work, it is good evidence in a subsequent court proceeding that you have been reasonable and fair with your customer, enhancing your chances of success in recovering through the court system. We recommend this approach as an enlightened solution to a nagging business problem.
– Curt Ward