Unpaid invoices are the bane of any company, no matter the size. These debts can be the result of the customer having financial difficulties. They can also stem from errors in your company’s account receivables process. Whatever the reason, unpaid invoices can be the source of much frustration, and if the problem is not swiftly resolved, it can become harder to recover lost payments.
If you are having issues with individual clients or have accumulated a backlog of bad debts, then this article will provide some useful guidelines on how you collect on old commercial debt.
Typically, you stand a higher chance of recovering the full amount of your debt within 30 to 60 days. It is still possible to recover your lost money after this time, but it can become a much more complicated process.
Identifying problems quickly is a crucial factor in managing any debts. Having clear processes in place can help you manage relationships, find solutions, and have your invoices paid (we will discuss this in more detail below).
In most cases, hiring a commercial debt collection agency will be a sound business decision, as they will use their industry expertise and access to credit information to help you find other solutions.
The final option to collect an old debt is through legal means. This is usually considered a last resort because of the high cost in time and money.
It’s usually best to try and resolve payment issues yourself, but if you are no longer receiving communication from the debtor, then legal action might be necessary. When considering legal recourse, one important thing to keep in mind is the statute of limitations for commercial debts.
The statute of limitations sets out specific time limits on when you can take legal action to recover the debt. The limits differ in every state and depend on the type of contractual agreement in place. For example, in California, the statute of limitations is two years for oral contracts and four years for written agreements. In comparison, in Texas, the statute of limitations is four years for all types of contracts.
When these time limits have expired, it is not possible to take legal action to recover the debt, and it will become a “time-barred” debt. While the debt itself will still exist after this time, companies will have to rely on different means of recovery or potentially write off the debt.
The team in accounts receivable must have structured processes in place to identify any issues at an early stage. If a company stops answering emails and calls or fails to meet a deadline, then you should escalate this issue immediately.
It’s essential to send out prompt invoices and communicate regularly with your clients from Day 1. Having clearly stated credit terms on your contracts and services agreements can go a long way in solving any future issues.
It also makes a lot of sense to do due diligence on new customers before offering them a line of credit. Carrying out thorough credit checks and creating a credit policy for the company are two processes that should be integrated into payment systems and processes.
In some cases, there may have been an administration error at your end, which can cause delays and embarrassment. Therefore, invoices should be itemized and checked before sending it to the customers. When customers fail to pay, make sure you send weekly reminders. In most cases, the longer you leave the debt, the harder it will be to recover. If you’re still not having any luck collecting, then it’s worth talking to a commercial debt collection expert.
The collection of old debts can be a tricky process, but a commercial debt collection expert will apply innovative solutions to ensure the return of your lost payments.
Professional commercial debt collection agencies understand the unique nature of businesses and provide tailor-made solutions. They will carefully research the debtor company and utilize a range of options to create a sense of urgency.
Many companies may be put off using commercial debt collection agencies because they believe it will damage existing relationships between their clients and potentially impact their reputation in the industry. That is why it is essential to choose a company that has a proven track record, as they will understand the importance of clear communication and negotiation at every stage. By taking a relationship-based approach, payments are generally received much more quickly without burning bridges.
However, if all other remedies fail, then legal action may be required. In this case, it helps to have an expert that understands the state and federal regulations, as well as the unique status of your problem. Commercial debt collection agencies will be able to advise you on the necessary steps.
Once you have made the decision to use the services of a commercial debt collection agency, they will get to work as quickly as possible.
A professional commercial debt collection agency will start the process by doing a thorough review of the debtor company, which enables them to get a clearer picture of their current status and operations. From there, the agency will create a recovery strategy that will involve regular contact with the debtor to ensure a quick resolution. Each case will have a unique approach and may utilize emails, telephone calls, or face-to-face meetings with the debtor company.
Does your company have outstanding commercial debts? The team at Miller, Ross, & Goldman is on hand to offer practical solutions to resolve these issues. Contact one of our friendly team today to see how we can help you.