Businesses seeking to collect debts from other businesses (“B2B”) lack the governmental protections enjoyed by consumers. Often the business will turn over debt to a collections agency and call it a day, writing off these accounts and taking the loss. With a little planning and guidance however, businesses can employ more effective commercial debt collection practices.
When approaching commercial debt collection it helps to break up the process into two main phases:
- Pre-Collection; and
In the pre-collection phase you gather facts and evaluate the debtor business to determine the best way to collect. Review he in-take sheet or initial customer profile can provide a wealth of information here. Also, run credit checks to determine the business’s financial ability to pay. You should send out notices and file any liens to ensure they are done in a timely manner that meets any filing deadlines. Finally, you will want to review any contracts signed with the debtor business to determine specific default provisions and whether you can recover attorney’s fees.
The collections phase is where companies look to get paid on their commercial debt. Your best bet here is to work with an attorney to ensure that you can recover as much of the money owed to you as possible. However, too often companies choose one for the following three options, none of which are very good for your bottom line:
- Write off the debt – you may think that taking a loss and moving on is the best course, but this only works if a very small number of B2B customers fall into collections.
- Collect the debt internally – depending on the size of your business you may or may not have an experienced and dedicated debt collection point person, and handling commercial collections yourself means taking resources away from your core business.
- Use a debt collections agency – these outside agencies either buy the debt for pennies on the dollar or take a substantial cut of what they recover, either way, you wind up with a lot less that you should. The truth is that these companies do not have any way to force a company to pay the debt. The law allows for remedies that go well beyond the scope of a collection agency.
Working with an attorney, however, helps you take effective steps that increase the likelihood of a successful collection. Commercial debt collection attorneys have legal tools at their disposal, which provide breathing room for the collections process to succeed.
The process starts with sending a demand letter that includes the Louisiana Open Account Statue language. If the debtor is unresponsive to the demand letter then after thirty days we file a lawsuit against them. Most attorneys, including the ones here at Smiley Law Group, will take commercial debt collection cases on a contingency fee, meaning we only get paid when you do. Then your attorney secures a judgment (default or trial), which is valid for ten years as you engage in collections.
With a judgment for your debt in place your lawyer will then examine the assets of the debtor, and conduct a judgment debtor hearing where the debtor will be sworn in to give testimony about what the business owns. Your lawyer can also garnish banking and physical assets of the business, which prevents them from liquidating these assets. The potential for you to collect on the debt increases tremendously after securing a judgment in your favor.
At the end of the day, the only reason your company expends resources on collections is to make sure it gets paid. Thus, you need a commercial debt collection law firm that can successfully enforce your judgment by seizing bank accounts, garnishing wages, and filing writs to have the sheriff seize the personal and real property of your debtor.
Smiley Law has collected on hundreds of judgments to the tune of millions of dollars for its clients. Let our experienced attorneys turn your bad debt into capital that your company can spend to help it grow. Contact the Smiley Law Group for a free consultation today.