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Business to Business Debt Collection Strategies

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Every successful business relies on other businesses. This is the only way to keep a business thriving.  Restaurants rely on wholesale food vendors to stock a busy kitchen and a large law firm relies on temporary staffing agencies to staff temporary personnel needed to prepare for a document-heavy trials.  Smart businesses know the importance of maintaining relationships with their vendors by adhering to contractual agreements and making payments on time.  However, this is not always the case.  Sometimes legal intervention in the form of commercial debt collections is required where a business is not adhering to contractual agreements and not making payments. Legal intervention means utilizing strategies that will ensure that your business receives what it is due.

Accounts Receivable Monitoring

A great collections plan starts with bringing the business’ accounts receivable to date.  It is fairly easy for a large business to lose track of the businesses that owe them for services or goods rendered.  This is especially the case where a majority of other customers are paying and paying on time.  It is easy to allow the few rogue customers to fall through the cracks.  However, when a business has a robust accounts receivable monitoring plan, they are able to capture those instances where a business is not fulfilling their contractual obligations. A monitoring plan should include steps to be followed when a delinquent payment is discovered.  This includes sending out final bills, demand letters as well as collections lawsuit notices.

Debt Prioritization

With an effect accounts receivable monitoring system in place, the business should decide where to focus its resources in its collection efforts.  The most logical step is to focus on the businesses that owe the most by the dollar amount.  This is one way to prioritize.  However, it may be more effective to focus on the businesses that frequently violate contracts by not paying. Although Company A missed one payment of a large sum; Company B is missing several payments of smaller amounts.  In this example, the prioritization system is to capture the companies who are the most risky to your business’ financial well-being.  A company that is a frequent offender is bad for business.  Such a company should be a collections priority.

Contracts Review

Contracts review is another important strategy in the debt collection process for multiple reasons. One main reason for reviewing contracts is to ensure that the business is behaving in a manner that comports with its contract.  In effect, as a business, you are legitimizing yourself by enforcing the terms of your contract.  If a contract requires payment within 30 days of rendered services or goods, then after the 30th day, the customer is in breach.  All businesses that are in breach must receive a notification of some sort detailing an enforcement action. Without this, a business’ contract is unenforced and the business loses its bargaining power within the contractual relationship. Contracts review is also important to ensure that the correct terms are being applied to the respective customer. A business whose terms are constantly shifting can benefit from keeping track of which terms apply to which particular companies. This will facilitate an appropriate response to contract breach and delinquent payment issues.

Let Us Help You Today

Commercial debt collection can be a critical component of doing business. We work closely with your accounts receivable department to ensure your business is paid the money that it is owed. If your business is looking for effective and affordable legal help to collect a business debt, contact the Law Offices of Larry E. Bray, P.A., to schedule a consultation with an attorney in West Palm Beach.

Resource:

investopedia.com/terms/a/accountsreceivable.asp

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