When To Hire A Collection Agency For Nonpayment

Hiring a collection agencyThe ideal business world would have perfect mathematical precision especially when it comes to small business invoicing. In all likelihood, invoices will be paid on time. But, the day may come that one goes unpaid.

What do you do? How to do you approach the person or entity that owes you money?

The best thing to do is initiate formal communication, in writing, with a demand letter. This can be best drafted by your attorney, but you can likely handle it yourself if you haven’t one. A simple search will show you good examples of this kind of letter.

While this letter doesn’t have any legal “weight” in the sense that the other party is any more obligated to pay their outstanding debt than before, it may be enough to get a certain kind of debtor to pay up. One or several letters does succeed in letting you set the tone for what is to come. The other party will know where you stand and will be much likelier to take you seriously.

If you set up the right kind of contract with the other party in the first place, there will be a clause in place about litigation. If they default, basically, they will have to pay your court and legal fees, in addition to their own, in the event that you sue. That’s a lot of money to avoid paying back money, so many lendees will back down at this point, settling with you out of court. This is the sensible thing to do anyway, and you never know how a party will react.

If you don’t have this kind of legal recourse, you’ll do well to hire a lawyer who specializes in small business cases, or hire a collection agency. There are different kinds of collection agencies, ones that buy your debt from you and others that coerce the other party into servicing their debt, and then taking their fee from that amount. Know all of the details before you bring one of these on board.

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