One of the biggest challenges for business owners is managing cash flow. Running a business is expensive, and while none of your creditors want to wait to be paid, sometimes collecting from your customers can be a real challenge. What can a business owner do to collect money owed by their customers?
You have to take action…
You have to rebel against the Nova Scotia ‘nice guy’ persona so deeply ingrained in us. We are brought up to be so neighbourly that I’ve noticed clients sometimes feel like standing up and demanding to get what they are entitled to somehow feels rude. However, if you do nothing, most delinquent accounts will never get paid.
I’m here to tell you it is not rude to stand up for yourself.
If something bad has happened, go see a lawyer. You owe it to yourself, and the business you’ve worked so hard for, to at least find out what your options are. Many law firms offer this sort of initial consult for free or at a reduced fixed rate. You get to explain what has happened and get an opinion on where you stand in the eyes of the law. Walking into a law firm for a consult is a long way from actually suing someone and you may walk out with some suggestions on how to resolve the situation without any further need for a lawyer’s assistance.
And please, rest assured – you’re not alone.
When clients finally do come in, many reveal that the reason they delayed coming in was that they were embarrassed to have landed in the situation. None of us are born knowing how to run every element of a business and we all make mistakes. Burying your head in the sand and pretending the situation didn’t happen is never a smart business decision.
In most cases, you’ll have a choice of several routes to take.
Sometimes the first step is just going back to your customer armed with better information to insist on payment. Often, a good first step is a formal ‘Demand Letter’. This is where you hire a lawyer who writes a letter which says, ‘I’ve reviewed the file. I think my client is right, so pay within ‘X’ days or we’ll sue’. This letter will cause many customers to stop playing games and pay in full. They realize you’re not going to let it drop and they don’t want a lawsuit they know they won’t win. At the very least, it may start a conversation that could lead to an acceptable resolution.
If you’re not owed a huge amount, Small Claims Court is often a great option.
In many places, you can be in front of the judge in as little as two months. You often get a decision the same day as your hearing. It costs less than $100 to file a claim seeking less than $5,000 and just under $200 to seek more than $5,000. You can represent yourself from start to finish or enlist the help of a lawyer – often a great option. In many places, you can be in front of the judge in as little as two months. You often get a decision the same day as your hearing. It costs less than $100 to file a claim seeking less than $5,000 and just under $200 to seek more than $5,000. You can represent yourself from start to finish or enlist the help of a lawyer. ur issue also gets resolved significantly faster than taking the matter to Supreme Court.
For a Supreme Court action, you’ll need a lawyer.
Supreme Court is laden with red tape and costly, with many required procedures. Be sure your lawyer is very clear upfront about the legal costs, how long it will take to get a decision, and your realistic chances of success. Just as important, be sure to discuss the likelihood of actually collecting if you win. In debt collection, winning is only half the battle. You also have to enforce the order.
Once a judge has determined you’re right, the next, often more challenging step is actually collecting.
Most debtors will not simply write you a cheque – you have to enforce against them. Your lawyer can register the judgment at the Registry of Deeds. This will prevent them from selling/mortgaging their property and after a year you can actually force the sale of their property. Your lawyer can also enlist the help of the Sheriff’s department to garnish wages and empty their bank accounts. In extreme cases, you can repossess their personal property.
The bottom line on your bottom line is, you have options, and doing nothing isn’t your best one. Take the plunge, talk to a lawyer, and learn what they are so you can make an educated decision.
Adapted from CTCNS Journal Contribution by Dianna M. Rievaj, MBA, LLB, Managing Lawyer at Highlander Law Group