Every business, regardless of size or industry, faces challenges related to unpaid invoices or debts at some point. While extending credit can foster customer loyalty and boost sales, it’s essential to have strategies in place to recover any money owed to one’s company to better ensure that the business isn’t saddled with financial burdens that rightfully belong on the shoulders of others.
When it becomes apparent that a bill isn’t getting paid, it’s important to reach out to the debtor before initiating formal legal action. Sometimes, a simple reminder or a phone call can resolve the issue. It could be an oversight, a lost invoice or a temporary cash flow problem on the debtor’s end. Communication can often lead to a quick and amicable resolution. With that said, some situations aren’t so easily resolved.
When a reminder isn’t enough
If a debtor is going through financial difficulties, consider offering a payment plan. This flexibility can be beneficial for both parties. The debtor gets more time to pay, and the business receives the money owed in increments.
If initial communication efforts don’t yield results, your first step in escalating the situation should likely involve sending a formal demand letter. This letter should outline the debt amount, provide a deadline for payment and state the next steps if the payment isn’t received by the stipulated date. You cannot harass a debtor, so take care to make sure that your efforts are “within bounds” of consumer protection laws or your situation may become even more frustrating than it already is.
If the debtor still doesn’t respond actively – and favorably – after amicable attempts to resolve the issue have been made and formal demands have been extended, your business might need to consider taking legal action against the debtor. Especially if the amount owed is significant, making this effort may be worth your time and resources.
If you have questions about filing formal legal action against a debtor, don’t hesitate to seek legal guidance. Abiding by consumer protection laws while recovering what you’re rightfully owed can be a tricky business if you try to go it alone.