BUSINESS ACCOUNT
COLLECTION
In small businesses, being paid for ones
work, being only partially paid, or having to expand energy and money to
collect an account is a huge detriment to ones bottom line. In an effort to
minimize your difficulties Courtney Aarbo Barristers and Solicitors
(www.courtneyaarbo.ca) is pleased to provide you with;
10 Tips for account Collection
- If your business is not being ‘paid up front’, then you are in
the business of extending credit and you should try to think a bit like your
bank.
- If your business is extending significant credit, have the
customer fill out a credit application, which will hopefully contain
information about the customer’s address, place of employment, and bank.
All this information way be invaluable in later trying to chase the
customer for payment.
- If possible obtain a credit card number with an authorization
to use it to pay for the services once completed.
- If worried about a customer’s credit worthiness do some basic
checks on him or her. For example our office or a registry shop can order
a ‘Personal Property Registry Search’ at a cost of only a few dollars.
This search will show what creditors are registered against the customer
and against his or her assets. It will also show registered writs of enforcement
by other creditors who have obtained Court Judgments. Obviously doing
business with a poor credit risk is to be avoided.
- If possible prepare a contract with the customer and make sure
it is properly signed. The contract should specify the ‘terms of payment’
and what interest is to be paid on overdue accounts. Note: Simply putting
an interest rate on the bottom of an invoice (for example 2% per month) is
not legally enforceable. An interest rate must be agreed to in writing in
a contract in advance of the contract’s performance.
- Make sure any contract contains a term that the customer will
repay to the business any and all costs of collecting an account,
including lawyer’s fees and disbursements on a solicitor/ client basis. Hopefully
if you need to hire a lawyer to collect an account, the cost can be added
to the claim.
- Be sure to clearly and carefully document on invoices the
services which have been done or provided and the charges and credits on
the account. Too often unclear accounting results in a customer not paying
on a timely basis, or at all.
- Be sure that any changes to the work being done or product
provided is carefully documented, preferably with the customer
acknowledging the change in writing. Surprise changes in a final
accounting often result in payment problems. If an account has to be sued
on to collect an improperly documented change, a judgment may not be
awarded by a judge.
- Keep a complete file reflecting what has been done for the
customer. For example memos of important conversations or copies of emails
confirming important events provide a good record. This documentation will
be very useful in settlement discussions or court proceedings.
- Sit down with a customer to discuss in a calm straightforward
manner any difficulties he or she has with the services or the accounting.
Often misunderstandings can be worked through before positions harden on
payment. Often a small compromise on an account is much better than a
dragged out fight with a customer, sapping your time and energy, and
possibly incurring legal bills.
The above points deal largely with account
collection before the need to come into a lawyers office. Frankly the most
positive outcome for a business is not to have to hire a lawyer for account
collection. While we are happy to provide legal services for this purpose, we
would prefer to see accounts all paid on time leaving business to retain our
services for more positive purposes.
We hope you find the above to be helpful.
Gary C. Courtney
Courtney Aarbo Barristers & Solicitors
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