Ideally, when a business sells goods or services to other companies, they will have protocols in place in case a corporate client fails to pay for those goods or services in a timely manner. For instance, an organization may decide that it will wait 30 days to receive payment before it sends a demand letter to a client.
A demand letter will make clear that an attempt is being made to collect a debt, and it will also give the debtor an opportunity to either acknowledge or dispute the amount owed. Debtors should be given an opportunity to propose payment plans or ask that some or all of their outstanding balances be forgiven. If the response to such a letter is inadequate, it may be necessary to take a company to court to obtain payment of a past due balance.
However, it is vital to analyze whether the debt is a commercial or consumer debt. All efforts to collect consumer debts must comply with the Fair Debt Collections Practices Act and California’s similar Rosenthal Act.
Preventing late payments
Companies can take several steps to ensure that their clients pay what they owe in a timely manner. For instance, an organization may require that new customers pay in cash or with a credit card before buying a good or receiving a service. Businesses may also want to run credit checks on new customers before allowing them to pay over a longer period of time.
While companies may have their own credit managers, attorneys may also be able to help with the commercial debt collection process. An attorney can craft or send demand letters or other documents in an effort to collect what corporate clients owe. An attorney may also be able to represent a company’s interests in court if settlement talks fail to yield a favorable outcome. In some cases, disputes over unpaid debts may be solved through mediation or arbitration. Legal counsel can advise you on the best course of action for your situation.