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January 10, 2013
“From the Desk of Don Leviton, Esq.” is a featured monthly article from Brown & Joseph’s General Counsel, Don Leviton.
Have a written credit policy and follow it on a consistent basis.Know your customer. Is your customer an individual, a sole proprietor, a partnership, or a corporation? Businesses often use fictitious names and acronyms for their businesses. It is important to clearly establish who is responsible for the obligation.
Plan for collection problems before they happen. Your credit agreement or application should provide for provisions for attorney's fees, interest at the highest rate allowable and late charges for a delinquent account. In order to recover attorney's fees, most courts require a written agreement signed by an authorized representative of the customer.Use personal guarantees, especially when you are dealing with new companies that do not have a credit history and will try to escape personal liability by creating a corporate account.
Have a detailed credit application. All of the above, and more, should be contained in a comprehensive credit applicationIf possible, obtain a security agreement that can be used to create a lien on the equipment celebrity gossip or merchandise sold to protect you in the event of a default or bankruptcy filing.
It is essential that accounts are closely monitored during the first three months of aging and an evaluation should be made without delay whether an account should be sent out for collection.Almost always, debtors will ask and creditors will afford a debtor a final opportunity to remit, hopeful that payment will be received the next day, or next week, or next month. This tactic is used by all debtors. Your most effective tool is acting promptly.
The strategies discussed above will assist you in managing your accounts receivable and provide for increased collection success if and when the account is sent out for collection.
Contact us for any questions about your receivable problems.Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.