By Kevin J. Cummings –
As the current economic roller coaster endures peaks and valleys, many businesses are left wondering what to do when clients cease paying invoices. Far too often, businesses take a passive approach to past-due accounts, which allow the debts to grow stale and possibly uncollectable.
There are ways businesses can protect themselves from having to cut their profits to cover unpaid, past-due accounts.
The first step is to identify the debtor. In the business context, some entities operate under different corporate forms or names. There is a vast difference between having an open invoice with “A-Tech Company” and “Tech Company A”. Taking the time to confirm the debtor’s legal name and entity will help you protect your interest should legal action be necessary.
The same can be true for individual clients. The individual you know as “John Smith” may actually be “Robert John Smith, II”. Properly identifying the debtor may help with present or future collection efforts, especially if the debtor’s contact information is no longer valid.
It may be prudent to review intake policies to obtain the correct legal name of a client, whether it be a business entity, individual, or personal guarantor. Even longstanding accounts should have a period of re-affirmation and review, if not to protect your interest, then to keep business records current.
As the recent pandemic demonstrated, businesses are either operating remotely or may have changed locations entirely. There are times when invoices are delivered but the intended recipient is no longer at that address. A simple internet or social media search often provides insight into the current happenings of any given business. The United States Postal Service can also be helpful in determining whether a business has moved or relocated.
Similarly, updating email and phone contacts can be a simple way to get an invoice paid. As employee turnover continues to be high across America, your primary contact may have left the company and his or her emails and voicemails may be sitting dormant in an inbox awaiting review. Having a direct contact can often streamline payment of delinquent accounts.
Doing a periodic review of where your clients are located can assist in protecting yourself in the future, or even reconnect you with former clients you may wish to engage again.
The adage, “the sooner the better” is axiomatic when determining when to take action on past-due invoices. Often, businesses unknowingly become de facto creditors, providing goods and services, on an unofficial rolling-account basis. Eventually, payments will evolve from being tardy, to not arriving at all.
When an account goes past due, there should be an internal process triggered whereby all channels of communication are open to engage the client. The level of communication efforts will depend on the strength of relationship between the parties. The longer an invoice remains unpaid, the less likely it will be paid voluntarily.
Businesses have a specified time within the Commonwealth of Pennsylvania to seek judicial intervention to attempt to collect unpaid business debts, depending on the nature of the relationship with the client or the nature of the debt.
By being proactive and striking a balance between maintaining the business relationship and protecting the business, owners can put themselves in a position to recover past-due account.
Each business is built upon hard work and sacrifice. From the iron furnaces of Scranton to the steel mills of Pittsburgh, Pennsylvanians have a long, proud history of creating enterprise opportunity from the ground up.
When clients do not pay for services or goods, whether it be restaurant supply services, trucking services, IT services, or any other merchant services, the greater community suffers. Unpaid commercial debt starves a business of capital for expansion, improvement, and community engagement. It is inequitable for one business to reap the benefits from the hard work of another without compensation. That is why it’s important that businesses explore every avenue when the end-of-the-month balancing of the financial books leaves the scales off-kilter.
Far too often, businesses are left asking themselves, “what happens now?” when a client doesn’t live up to his or her or its obligations.
There is a fine line between an open dialogue and a one-way stream of communication when it comes to client relationships. At some point, the vague promises to pay, or worse, the unreturned calls, texts, emails, and letters can suffocate even the longest standing business relationships.
The resolution to a business dispute over unpaid invoices is to seek competent legal counsel with experience in commercial collections and business disputes.
When looking at the ledger at the end of the month, it is important to remember all the time and effort that went into each line item. Hard work and sacrifice should not be bogged down by others who either willfully fail to live up to their end or the bargain, or who outright ignore their obligations.
When a business doesn’t know what to do when others haven’t delivered on their promises, it is time to seek counsel and review all options to make the business whole.
Bernstein & Burkley, P.C. has spent more than 50 years fighting for businesses when customers fail to meet their financial obligations. The attorneys and staff are well versed in a multitude of progressive collection techniques focused on recovery, service, and integrity. Whether the nature of the unpaid claim is a piece of farming equipment or a large-scale installation of fiberoptic cable, Bernstein & Burkley, P.C., will utilize its collective experience to deliver results. Contact us for more information or to find out how we can help.