Effective Techniques for Business Collections
Businesses need to be able to collect outstanding financial obligations in a timely manner. If another company owes your firm money, it could lead to a serious dispute—even litigation. There are proactive strategies that businesses can use to secure their finances. Here’s what you need to know about business collections.
Tips for Business Collections
Always Bill Promptly and Clearly
Effective business-to-business collection is proactive, not reactive. The first step in efficient commercial collections in California is prompt, clear billing practices. The longer you wait to bill, the more challenging it is to recover full payments. As a general rule, invoices should be sent right away after goods or services are delivered—with charges itemized and terms of payment explicitly stated. Proper billing practices minimize confusion and eliminate excuses for delayed payments.
Stay in Contact With a Business that Owes Money
Communication is another key to business-to-business collections. Maintaining open lines of communication with commercial debtors is crucial. Regular contact not only reinforces the urgency of the due payment but also helps in understanding any potential disputes or financial difficulties the debtor might be facing. Effective communication can involve sending reminders, making phone calls, and even scheduling meetings to discuss the payment status.
Obtain/Organize Proper Documentation
To effectively collect on an outstanding financial obligation, you need to stay organized. Thorough, reliable documentation is the backbone of effective collection. Depending on the specific situation, relevant documents/records could include contracts, invoices, proof of product delivery or service provision, and any correspondence regarding the debt. By having all the relevant documentation on hand, your California company would be in the best position to take action.
Take Prompt Action to Address Financial Delinquencies
Here is one of the core rules of business-to-business collections: The greater the length of the delinquency, the lower the chances for a full recovery. For this reason, prompt action is key when dealing with financial delinquencies. As soon as a payment is missed, steps should be taken to address the issue. This could involve sending a polite yet firm reminder or even directly contacting the debtor to negotiate payment. The faster you act, the better your chances of collecting. Here is a general rule, a commercial delinquency that is 60 days past due is a serious issue. As a best practice for business litigation collections, action should be taken before 60 days.
Send a Demand Letter (Drafted By Attorney)
If initial collection efforts fail, the next step may be to send a demand letter that is drafted by an experienced Los Angeles commercial collections attorney. Black’s Law Dictionary defines a demand letter as a document that informs the receipt that “a problem exists and that taking specific steps could efficiently resolve” the issue. In other words, the letter serves as a formal request for payment and indicates the seriousness of your intent to collect the debt.
Consider Offering an Alternative/Adjusted Repayment Terms
When there is a major business delinquency, an alternative repayment option may be the best path forward to maximize recovery. Some business debtors may face genuine financial hardships that prevent them from paying the full amount on time. With that in mind, offering alternative or adjusted repayment terms can be beneficial. Flexible arrangements—such as extended payment plans or a discounted settlement—may help recover debts that would otherwise remain unpaid.
File a Lawsuit to Secure a Judgment for an Outstanding Debt
In some cases, litigation may be the best option. Generally speaking, this option should be
taken when all other commercial collection efforts have failed. Securing a judgment through the court provides a legal mandate for debt repayment. A judgment can then be enforced through various means—from the garnishment of wages to the seizure of assets. A Los Angeles, CA, business-to-business collection lawyer can help you determine the best path forward.
If you have any questions about the best techniques for business collections, we can help. Give us a call now or contact us online to arrange a strictly confidential, no-obligation initial appointment. With offices in Pasadena and Monrovia, we provide commercial collection representation in Los Angeles and throughout Southern California.