6 Ways to Make Them Pay
You thought you had been so careful, so very prudent. A customer, perhaps
even a supplier, seemed so above-board, so solvent, so trustworthy.
But you've been left high and dry. Maybe a client owes you money for products
or services or a supplier has happily grabbed your cash without delivering the
goods.
If visions of exorbitant attorneys' fees immediately wash over you, stop and
breathe. In many instances, there are ways to pursue legal action to collect
what's owed you without resorting to the tick-tock of a lawyer's hourly rate:
- Small-claims court
This can prove a viable option for resolving
many disputes, particularly if the dollar amount involved is relatively modest.
In most states, all you need to do is contact the small-claims court in your
area and ask for the necessary paperwork to file a claims action. It's usually
a rather simple procedure, and your court may provide information to help you
get through the entire process. You file the paperwork, make certain the opposing
party is served and the court sets a date to hear the case.
Small claims offer several advantages. First, you don't need an attorney
to file the paperwork or even represent you in court. Moreover, filing fees
are usually modest; for example, my court charges only $40 to process the paperwork.
And the process is designed to move quickly. Decisions are usually handed down
on the same day of the hearing.
However, there are several nuances to bear in mind. For one thing, the amount
you're able to file for varies from state to state. For instance, in Maine,
the maximum is $4,500 for a claim. In Michigan, the limit goes down to $2,800
per claim. Further, the onus is still on you to make your case, so you have
to present evidence, documentation and other forms of adequate proof.
You're charged with knowledge of the law in small claims court. "It's
not like 'Judge Judy' or 'The People's Court' where they walk you through holding
your hand."
- Mediation
This type of dispute resolution can take a couple of
forms. For instance, some small claims courts provide mediators. Rather than
hearing a case, a judge may direct parties to work with a mediator to see if
they can hammer out a settlement short of an actual court decision. In other
cases, parties involved in a dispute may hire a mediator to help work out a
suitable arrangement. Although mediation can also prove far less costly
than formal legal action (fees are usually split) and much faster, it's not
100% effective. A mediator is the conduit to smoother communication, but it's
up to the two sides involved to agree voluntarily to some sort of settlement.
- Arbitration
A variant of mediation, arbitration lets businesses
in a dispute work with an impartial arbitrator to hear both sides of the case.
Like mediation, the process is faster and more cost-effective than conventional
legal channels; indeed, your Better Business Bureau might provide volunteer
arbitrators. However, unlike mediation, it's the arbitrator who hands down
a decision, a final ruling that both sides are bound to honor. For more information
about arbitration or to locate an arbitrator, check out the
American Arbitration
Association's Web site.
- Collection agencies
As you likely already know, collection agencies
are businesses that can be hired to pursue debt collection. However, many collection
agencies will only take cases that offer a reasonably good chance of success.
Moreover, they can be pricy. "Some collection agencies will charge up to 50%
of any amount they collect," says Fred Steingold, author of "Legal Guide to
Starting and Running a Small Business."
- Internal Debt Recovery
Today, many businesses can arm
themselves with similar software used by collection agencies to recover
debt. One of the most common techniques used by collection agencies
is a simple dunning letter system. Dunning letters work by
progressively sending the customer a professionally written letter that
warns the customer of the consequences for not paying the bill. If
the mailed letters are ignored, more mailing pieces are sent with a
slightly stronger tone and promises of more threatening action to come.
In many cases, this technique works well with most delinquent customers
paying and no phone calls are legal matters being required.
ManageMore Business Software is one such product that offers a built-in
collections system that allows you to create your own dunning letters and
keeps track of what the next dunning notice should be for each customer.
- Credit action
If you're unable to collect money owed to you, consider
contacting your state's credit bureau. They'll provide you with the means necessary
to make the bad debt part of your opponent's credit record. While that may
seem like cold comfort now, it may offer valuable leverage years down the line
when a bank or other lender refuses the offender a loan because of the bad
debt. That may prompt your less-than-reliable customer or client to make good
on what's owed you to clear up the credit report.
No matter which route you choose, you will need to know just how far to take
things. For example, while many people may plead poverty outside the courtroom,
pay close attention to what they say on the legal record. You'll get a clear
indication of just how much money your opponent actually has and whether you
should go after the full amount. If there's evidence of ample assets, pursue
your fair share. However, if legal documentation shows little in the way of funds
and an ex-customer offers you 50 cents on the dollar, it may be prudent to take
what you can get.
It's also critical to know when to bring in an attorney. For instance, if
the money in question is substantial — say, beyond the purview of your state's
small claims guidelines — an attorney might be worth the extra expense. Similarly,
pay attention to your opposite number's attitude, especially if there's serious
money at stake. If you're dealing with someone who's obstinate or difficult,
you may want to get an attorney involved.
But if relatively little money is owed, and your customer is belligerent,
it's no disgrace to just let the whole matter slide: "Give some thought to just
writing the thing off. In business, it's often just as important to get the matter
resolved and to get onto other things./
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