Debt Recovery: Getting the Money you are Owed
There are certain unalienable laws in the world of business and commerce. We trust that on provision of a service, or exchange of goods, payment will be made as agreed. What recourse does one have as a seller in the event that this agreement is broken? Most often, it is helpful to start by asking for payment again. Keep the tome of your request, whether written or oral, friendly; non-payment may be simply an oversight or perhaps the check really was lost in the mail. Your request should restate what was provided and what is owed. Include a due date and payment options. I would not rule out making a personal phone call if your initial letter does not yield a positive response.
If this first step approach does not correct the problem you may have to consider a more serious course of action.
Taking legal action
Most of the time debts are settled with the phone call and letter approach to debt recovery. This is perhaps most cost effective as it does not involve filing fees and the like. Occasionally, you will not achieve your goal of debt recovery with the first tier approach. At this point, you must consider the possibility that you may need to take legal action. Again, this can be an expensive option, especially if you must involve an attorney. If the debt is somewhat small it may be cheaper to simply write it off. A common exception often occurs between landlords and tenants. When rent is not paid by the agreed upon date the landlord goes to court to get what is called a dispossessory notice. The tenant must answer the warrant, and ultimately appear before a judge. If the matter is not resolved, the tenant is ordered to vacant the premises –usually within 14 days. On the other hand, if the debt is substantial, contact and advise the debtor of your intention to take legal action. You may try to recover the debt through small claims court or via a lawsuit.
Small Claims
Small claims are defined as the name suggests. The term refers to the total amount or value of that which is owed. Although the amount may vary depending upon where you live, small claims generally encompass those amounts totaling $10,000 or less. Contact your local magistrate court for more on this option.
Should You Sue?
There are a number of considerations involved with this approach. Expense is not the only concern or the least of your concerns. You must also be able to gauge how likely is it that you will you be able to get a judgment or settlement in your favor from the courts. Also, how likely is it that you will actually recover the money owed to you? Be mindful that this may involve strong action – such as garnishment - against the debtor. Finally, does the debtor have the money and/or assets to satisfy the debt? If not you will be out your original debt in addition to expenses incurred in debt recovery.
Other Options
Options after the debt has been incurred are somewhat limited. In addition to those listed above some vendors offer a settlement. This is particularly useful with old debts and allows you to recover at least some of the debt. The other options are most useful at the outset. These include:
• Know who you are doing business with. If you don’t have access to credit reports, perhaps you can rely on personal references.
• Follow-up on missed payments immediately. As more time passes you are less likely to recover the debt.
• Make easy payment options a priority. Accept credit cards and consider using a system that guarantees checks.
• Ask for payment or a deposit up front if possible.
• Maintain excellent customer service and get a clear idea of your buyer’s goals and expectations in purchasing your products or using your service.
• Understand that you will experience some losses related to bad debt and build these into your budget.