Collection FAQ: When is the Right Time to Take Action Against an Outstanding Invoice?
If you run a business, odds are you have run into the problem of providing goods or services to a customer who is delaying on making payments. Reputation is everything in business - many of our clients ask us when the right time is to move from just re-sending invoices and emails to involving an attorney to enforce a written or oral contract.
Q. I love my customers, so I give them a bunch of chances to catch up on unpaid invoices. But when have I been waiting long enough? Should I just let it go or should I pursue legal action?
Deciding whether to pursue legal action against an individual or a company that owes you a debt is unique to you. Only you know what the right decision for you or your business is. But, here are some things to consider:
Is the invoice large enough that it would cause an impact on your bottom line?
Even if the outstanding amount is relatively small, are you worried that your accounts receivable are starting to stack up?
Has this customer consistently paid late or failed to pay in the past?
How much time are you spending trying to collect unpaid bills?
Are you concerned that letting unpaid bills go will set a bad precedent in your business?
Consider the principle of the thing: is it ok with you to let someone “get away” with not paying a bill they rightfully owe?
Take a look at this particular outstanding invoice in the context of your larger business. What would happen to your bottom line if several customers didn’t pay at once? Do you have a system in place to ensure bills are paid in a timely manner?
Working with an experienced collection attorney is one way to establish a system to get outstanding invoices paid. We’ve written before about the full collection process in a former blog, but here’s a quick recap of how it works here at Wakefield Law:
If you have accounts receivable that you just can’t collect, you can turn these unpaid accounts over to the experienced collection attorneys at Wakefield Law.
One of our attorneys will contact your customer, giving him or her notice that the debt has been turned over and all communication should now be with the attorney (Read: the end to you running around trying to track down delinquent customers! You can just get back to work and let us take it from here.)
If the customer fails to respond or make a suitable offer for payment, Wakefield Law will proceed with a lawsuit against the debtor. This process includes a variety of legal tools that we can use to pursue your claim.
We always treat your former customers respectfully while at the same time pursuing your claim aggressively.
Throughout the legal part of the process, Wakefield Law handles all communications and interactions with the debtor. Even if he or she agrees to pay, the attorneys at Wakefield Law will negotiate on your behalf to make sure that the debt gets paid in full (if your contract allows for it, we may even be able to pursue attorney’s fees and interest on top of the initial debt).
Here’s the best part: you don’t have to pay an hourly rate for our legal efforts on collection cases. At Wakefield Law, we conduct our collection cases on a contingency basis. You can read more about this concept here, but basically, this means that we take a percentage of any money that we are able to collect. If we aren’t able to collect from the debtor, then you don’t owe us a thing. The only up front cost associated with hiring a collection attorney is providing a cost fund which is used to cover administrative fees like court costs and filing fees. For example, on a $5,000 claim, we generally will need a $250 cost fund. Amounts spent from the fund are added to the former customer’s debt. Any amount remaining in the cost fund is returned to the client when the claim is concluded.
So, if you have any questions about your outstanding invoices or want to learn more about our collection work, feel free to give us a call at 703-771-9740.