By David A. Ericksen, Esq. – Severson & Werson, PC

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The Collections-Claim Connection: Getting Paid without Getting Sued. Below is a quote from this article:



Experience shows that many firms fall behind in their collection efforts and accrue large, overdue receivables because they find discussions of such issues with clients to be awkward, uncomfortable, and even “unprofessional”. In reality, it should be seen as unprofessional to not address the issues. There are professional ways to pursue such issues without their becoming a point of conflict with a client. If they do become a point of conflict, it is better to know sooner rather than later.



A good collection procedure will typically follow a rational path of escalation. Such a Procedure may include some or all of the following:



1. Even if a payment is not technically “due”, consider sending a reminder notice. For example, if an invoice has a thirty (30)-day payment period, it may go to the bottom of the pile. A reminder fifteen (15) days before the due date will often move the invoice back to the top of the pile.



2. If a payment is not received by the due date, a prompt written reminder should be sent. It should be succinct, courteous, and professional.



3. If payment is not received within a short time of the reminder letter (e.g. 10-15 days), it is time for a personal contact. It may be in person or by telephone. Avoid asking questions such as: “Is there a problem?” Rather, ask: “Is there a reason we did not receive payment on time?” this is less likely to suggest vulnerability. Confirm the conversation, any explanation, and the commitment to pay in writing. The explanation and the commitment may often be useful in a later collection effort and to defeat any differing excuses offered later. Even if no explanation is offered and no commitment made, the conversation should be documented for later use in establishing notice and the lack of criticism.



4. No later than thirty (30) days after a payment becomes overdue, all strategic options and requirements should be considered. This would include contractual options such as suspension of services, enforcement of guaranties, and notifications to owners and lenders. It would be also include statutory remedies, such as lien notices and stop notices. Again, none of these measures is unprofessional, but are simply tools to be used to keep a project on track.