Client relationships are the lifeblood of your company. Employing well-structured billing procedures and an effective debt collection strategy can prevent interruptions to your cash flow while maintaining healthy client relationships.
Billing procedures should include clear written communication of all credit advancement terms and repayment terms, including how often the company will bill the client, the interest, how long the client has to pay, available payment methods and what penalties may result from late payments.
Efficient invoicing can prevent debt from accumulating. When it comes time to bill the client, the invoice must clearly state the due date for payment and how payment may be made. You should deliver the invoice to the appropriate person at the client’s business, whether that is the business contact or an accounting department.
A debt collection strategy consists of concrete steps to take when a balance becomes past due. Your strategy can include the following:
- When a reasonable grace period, say 15 to 30 days, has elapsed since payment was due, send a letter to the client. This letter should be a professional and polite assertion that your records indicate that the account is past due. The letter should also contain a reminder about the consequences of late payment, including interest or fees and the potential that more serious action will be taken to collect the debt.
- After the reminder letter is sent, follow-up with a phone call to the client to discuss the bill and to ascertain the client’s reason for not paying. If the client acknowledges that the payment is due but simply cannot pay the minimum amount on time, it may make sense to modify the terms of repayment.
- Once a payment is past due by 90 days, it is time for more aggressive action. This could involve referring the matter to a debt collection company. However, you should alert the client you are doing so, giving them a last chance to make payment.
It often makes sense to not engage a debt collection company but rather to hire a commercial debt collection attorney once payment is past due by 90 days. A letter on an attorney’s letterhead can often prompt payment with only limited legal fees and costs. If initial collection attempts are unsuccessful, the attorney can file a lawsuit or use other dispute resolution methods.
The lawyers at the Chicago business law firm of Schwartz & Kanyock, LLC have a depth of experience in commercial collection matters. To find out how our Debtor and Creditor Practice Group can help you deal with delinquent debt, call us at 312-436-1442 or contact us online. Our lawyers would be happy to advise you.
