When clients pay on time, your business benefits from easier to manage cash flow and liquidity. The opposite is true when your clients wait for weeks or months before paying you. In such cases, it becomes harder to manage your business as you have less fluid cash flow and less liquidity. What’s worse, you may have already spent the money necessary to fulfill your duties to the client: labor, materials, rent and other expenses.
Another disadvantage of having slow-paying clients is that you need to divert your resources to collections. Collecting debt that is owed to you can take time to make phone calls, send letters or in some cases hunt down elusive non-payers and/or threaten legal action.
Having an established business law firm with experience in collections could save your business time and money. It can also result in you getting paid faster.
Here are four situations when it may be time to hire a credit collection law firm in your debt collection efforts.
Situation #1: You don’t have a collections department
Many small businesses have a bookkeeper, controller or head of finance that overlooks both accounts payable and accounts receivable. As your business grows, you may even invest in separate accounts payable and accounts receivable personnel. This is adequate to cover financial tasks assuming clients are paying on time. However, late-paying customers often become tough to handle. Staying compliant with collections laws, the cost of generating written materials and the extra time spent calling can make the whole process counterproductive. Technology may have to be used to manage databases – another area of investment that could make setting up your own collections department a difficult decision for a small business.
The alternative is using a law firm with experience in collections. This ensures that efforts to collect your debt are compliant with local laws. Outsourcing to a dedicated collections provider such as a law firm with experience in collections allows you to leverage their economies of scale to conduct collections activity at lower costs to you.
Situation #2: You want to leverage credit reporting agencies.
Stubborn non-payers can often become complacent if they believe that you have little means of collecting your debt outside of costly litigation. However, if you had the capacity to affect their business credit score you may be able to encourage them to pay more promptly. Most businesses rely on their business credit score to access favorable terms for leases and purchases as well as establishing lines of credit with their bank. Your ability to impact their credit rating will likely push them to pay in a more timely manner.
A law firm with an established practice in collections will follow the correct procedures to first inform delinquent debtors that failing to pay would negatively affect their business credit report. If the debtor then continues to fail to make a payment, the law firm will report the delinquent debt to business credit agencies blemishing the debtor’s payment history.
Stubborn non-payers can often become complacent if they believe that you have little means of collecting your debt outside of costly litigation.
Situation #3: Your debtor has disappeared or is hard to reach.
Sometimes, your debtors may disappear or otherwise become hard to contact. This makes it much harder to send reminders and notices to the debtor as they may either not be at the address you are using or may be ignoring your communications. These entities may actually be hiding from you, other creditors and/or the law. They may also be high-profile individuals with layers of gatekeepers to protect them from communications from the creditors that they owe. A law firm has a number of options for finding and delivering communications to such businesses and people. These include, but are not limited to, skip trace investigations to hunt down difficult-to-find businesses and people and official service of documents by an experienced court-approved process server.
Situation #4: Litigation is required.
The goal of proactively involving an attorney in the collections process is to avoid the eventual need to take a debtor to court. Nevertheless, sometimes this is unavoidable. When the amount due warrants legal action and in cases of bankruptcy where debts are settled in courts and arbitration, it is essential that you hire an experienced business attorney with an established collections process to represent you. Your attorney will know the ins and outs of Federal, state and local laws as they apply to collections and can navigate the complex process of arbitration or courtroom litigation on your behalf.
Hire South Florida Law for Commercial Debt Collection
At South Florida Law, we are committed to helping businesses manage their debtors with proactive legal advice regarding commercial debt collection. We help our clients avoid unnecessary legal actions that can negatively impact profitability. We begin the collections process by communicating with debtors using best-practices that are both effective and compliant with state and local laws. South Florida law has the technology and resources to find and, if necessary, take action against the most delinquent debtors. This includes litigation and arbitration if required. At the same time, we provide a personalized service and attention to detail in your case at a price point that can only be achieved with a boutique firm of our size. Is your company faced with challenges related to collecting debts? Are you faced with debt owed to you by businesses or individuals who are difficult to find or difficult to reach? If so, call South Florida Law today on (954) 900-8885 or reach out to us via our contact form.