Why Hiring a Lawyer to Help Collect Debts Makes Sense for your Business
At Wakefield Law, we have been specializing in the collection of unpaid debts for individuals and businesses since 1995. In the world of business, so many important topics can demand our attention. Provision of services, sourcing of materials and supplies, customer service, contract drafting, marketing, and succession planning are just a few topics that our clients deal with every day. However, one topic also demands a business owner’s attention – collection of invoices. Setting up a process to collect money owed to your business is a critical component to the success of your business. Unfortunately, no matter how professional and skilled a business owner is, there will always be issues with accounts receivable. Keeping the unpaid and overdue accounts in check can be vital to the health of your business. The last thing a business needs is unpaid invoices accumulating quickly, causing a significant threat to cash flow. While there are several methods to collect these overdue payments, engaging a lawyer to perform debt collection legal services using a contingency arrangement can be a particularly effective and low-risk strategy. Here's why turning your collections over to a lawyer can streamline the process and enhance your chances of recovering what's owed to you.
The Challenge of Overdue Invoices
Every business, regardless of its size or industry, will at some point face the challenge of overdue invoices. When clients fail to pay on time, it can lead to a cascade of financial difficulties, including strained cash flow, inability to meet your own financial obligations, and reduced ability to invest in growth opportunities. Traditional methods of collections, such as sending reminders or making phone calls, often prove to be time-consuming and ineffective. We always tell clients that the more time they spend trying to collect their overdue invoices, the less valuable the fees are once they finally get collected. Setting up a process, such as turning invoices over to a lawyer if they are not paid within 30-60 days of invoicing, can be a healthy and functional process.
The Role of a Lawyer in Collections
Hiring a lawyer to handle your overdue invoices offers several distinct advantages:
Legal Expertise and Authority: Lawyers bring a level of authority and expertise that can often prompt quicker payments from debtors. The involvement of a legal professional signals to the debtor that you are serious about collecting the debt, which can encourage faster resolution.
Understanding of Legal Processes: A lawyer can navigate the complexities of collections laws and procedures, ensuring that your actions are legally sound and effective. This includes drafting demand letters, negotiating settlements, and, if necessary, pursuing litigation.
Resource Efficiency: By outsourcing collections to a lawyer, you free up your internal resources to focus on core business activities. This is especially important for small businesses that may not have dedicated collections personnel.
The Contingency Fee Advantage
One of the most compelling reasons to hire a lawyer for collections is the option of a contingency fee arrangement. Here’s why this is advantageous:
No Upfront Retainers: Under a contingency fee arrangement, the lawyer only gets paid if they successfully recover the overdue invoices. This eliminates the need for you to pay hourly fees or a retainer, making it a financially viable, very low cost option. The only fees to get started are funds paid to set up a “cost-fund.” What this consists of is an amount of money held by the lawyer to cover filing and court-related expenses. All expended funds are added to the debt the lawyer is attempting to collect. It’s still your company’s money, but the lawyer holds it to cover necessary costs.
Aligned Interests: Since the lawyer's payment is contingent upon successful recovery, their interests are directly aligned with yours. They are motivated to maximize the recovery amount and expedite the process.
Reduced Financial Risk: By removing the burden of upfront retainers, a contingency arrangement significantly lowers the financial risk of getting a lawyer involved. This allows you to pursue collections without the fear of incurring additional costs.
Efficient and Effective Collections
Turning over your collections cases to a lawyer can be a streamlined and efficient way to deal with overdue invoices. Here’s how the process typically works:
Initial Assessment: The lawyer will review your overdue invoices and evaluate the likelihood of successful recovery. This includes assessing the debtor’s financial situation and the validity of the debt.
Demand Letter: The lawyer will draft and send a formal demand letter to the debtor. This letter outlines the amount owed, the basis for the debt, and a deadline for payment, often prompting immediate action from the debtor.
Negotiation and Settlement: In many cases, as long as the client is amenable to it, the lawyer can negotiate a settlement with the debtor, which may involve setting up a payment plan or agreeing to a reduced amount in exchange for prompt payment.
Litigation: If the debtor remains unresponsive or refuses to come to the table, the lawyer can initiate legal proceedings. Lawsuits often compel debtors to pay, and if it goes to court, the lawyer will represent your interests to secure a judgment in your favor. After the judgment is entered, an experienced attorney understands how to use the court system to execute on the judgment and get it collected using summonses, subpoenas, and garnishments on employment and banks.
Don’t let unpaid invoices disrupt your business operations or hinder your growth. By working with Wakefield Law on a contingency basis, you can efficiently and effectively pursue overdue payments with minimal financial risk. This allows you to focus on what you do best – running and growing your business. If you’re struggling with unpaid invoices, consider reaching out to Wakefield Law for a free consultation – 7037719740