What A Small Business Can Do Prior To Taking A Larger Business To Court Over An Unsettled Account
In Credit Score of CreditGuru (September 4, 2010 2:27 pm)
For a small firm that has been waiting for a larger firm to pay an invoice for projects completed, or equipment provided, Debt collection by taking the case to court will be a serious step and one which could ruin the working relationship between the small firm and the large firm. This relationship could have been built up over a long period but in the current financial situation, many businesses could have come up against cash flow difficulties and could want to talk to each other before such a serious step of court proceedings is taken.
Before going along this Debt collection route, the small firm would be best advised to firstly examine the contract for projects or supply of equipment to the large firm and see if there is a late payment clause present. If so then they should still get in touch with the large firm even if it is only to have it explained why the payment is late. If the small firm has done a lot of projects or supplied many equipment over the years to the large firm and this is the first occasion a payment has been late it is only courteous to ask if there is a issue. It could be that there has been a simple error on the part of the large firm that can soon be rectified and payment made.
If on the other hand the contact with the large firm proves unsatisfactory then the small firm could want to invoke Debt collection proceedings and if a court case is realise that the court officials will need to see confirmation that the small firm has made efforts to resolve the dispute and tried to reach agreement with the large firm. So in the case of building confirmation of the Debt collection procedure a good strategy would be to buy Debt collection software, which should be able to use a database in which to store a log of the key activities in the Debt collection procedure. The Debt collection software should also cover the creating of Debt collection letters in some depth, importantly from the legal aspect so that if the Debt collection letters are produced in court, they should be acceptable. Debt collection letters will form the heart of the Debt collection procedure and so must be created carefully, referring to any sections in the contract that are relevant and of course, the Debt collection letters must be created in professional and unemotional terms, otherwise they could well put the small firm in a bad light in the eyes of the large firm. The Debt collection software should provide a manual covering the creating of Debt collection letters so that the small firm feels that they have got a good Debt collection software package.
The Debt collection software should have the facility to store key activities in the Debt collection procedure such as the creating and sending of Debt collection letters, incoming letters and emails, and a log of phone calls. All of these activities should be date and time stamped for traceability and the Debt collection software should be able to produce a formalised report of the sequence of activities. It would be hoped that the Debt collection letters would have the wished for effect and encourage the large firm to pay the invoice and so end the Debt collection procedure, rather that it finishing up in court, where the costs could mount up.
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