Every business owner can empathize with Mary’s ordeal. She spent an entire day chasing down customers who owed her money, despite having sent letters, emails, and even holding face-to-face meetings. Unfortunately, many entrepreneurs find themselves in a similar predicament, especially when there’s no written agreement in place. Should they seek the assistance of a lawyer? In this article, we will explore how to navigate the challenging terrain of debt collection successfully.
The Challenge of Debt Collection
For many business owners, dealing with overdue payments can be an incredibly frustrating experience. While maintaining strong customer relationships is vital, it becomes increasingly challenging when those customers start showing signs of delayed or non-payment. Like Mary, business owners often wonder how to approach this issue and what to expect during the debt collection process.
Stage 1: Setting Expectations
In the initial stage of debt collection, it’s crucial to keep your expectations in check. There are several reasons for this. Firstly, legal fees can sometimes exceed the amount of the outstanding debt, particularly when the debt is relatively small, perhaps less than R 1,000. Working with an attorney on a contingency basis is an option, but they typically claim a substantial one-third cut of the amount collected.
Moreover, you need to assess the strength of your case. Do you have proper documentation, including a written agreement, unpaid invoices, and demand letters? Does your agreement specify the interest payable on outstanding amounts and cover attorney or debt collector fees? Considering the time and costs involved, you must weigh whether pursuing the debt is worth it, as many cases end in settlements. Be prepared for potential compromises.
Stage 2: Enlisting Professional Help
Dealing with debt collection requires a unique skill set, and this is where professionals can make a significant difference. Attorneys and commercial debt collectors possess the expertise and knowledge needed to navigate the complexities of collecting outstanding debts. By hiring professionals, you not only free up your time to focus on your business but also send a strong message to defaulting debtors about your commitment to resolving the issue.
Stage 3: Documenting Files and Gathering Evidence
To strengthen your case, it’s essential to maintain a clear paper trail. If you’ve sent a demand for payment, ensure you have copies of the letter, evidence of mailing, and any proof of receipt or signature by the recipient. Keep records of any correspondence from the customer, especially if they dispute your claim or allege issues with your work. Organize these documents before initiating legal action, as additional correspondence from third parties can further bolster your case.
Stage 4: Hurry Up and Wait
It’s essential to understand that a lawsuit can span from three months to two years or more. Furthermore, many commercial cases settle for less than the full amount claimed. However, settling guarantees that you’ll receive your money, which may not be the case if you proceed to trial.
Stage 5: Retrieving Your Money
Obtaining your money isn’t instantaneous once you secure a court judgment in your favor. You or your attorney will need to locate the customer, identify their bank account, and ensure it has sufficient funds. This process can be challenging, especially if the customer attempts to evade payment. If the customer declares bankruptcy, there’s a possibility you might not receive anything at all.
Rather than becoming overwhelmed by collections challenges, consider strategies to prevent them. Having a written agreement that includes clear payment policies can significantly reduce the time and cost spent navigating the complexities of debt collection.
How Kredcor Can Help
At Kredcor, we’ve been specializing in debt collection since 1999. We have the necessary systems and contacts in place to ensure a higher rate of success in retrieving outstanding debts. Our professional team is well-versed in the intricacies of debt collection and can assist you in navigating the process efficiently. Don’t let unpaid debts burden your business; let us help you recover what’s rightfully yours.