With Overdue Debt Collections – Time Is Money

practical steps in managing debt collectionsThe old adage “time is money” is very true when it comes to overdue debt collections and accounts receivable. With few exceptions, the longer you delay overdue debt collections, the more trouble you will have collecting. If you have to extend credit, adhering to the following guidelines can put more money in your pocket and save you stress.

Be aware of the exact date your account receivable is due

If you do not receive payment by that day, you should immediately contact your debtor in writing to advise them that the account is past due and obtain a date certain within the next seven to ten days when you will receive payment. If you then do not receive payment within seven to ten days, or another specific date by agreement, contact them again in writing with stronger language insisting that payment is due.

Thirty days past due

Then, if payment is not made before the account becomes more than thirty days past due, send a letter advising that you will file suit against them if the account is not paid immediately, giving them a finite period of time to make payment.

Although the law does not require you to send this letter threatening suit in any particular manner, it is a good idea to send the communication via certified mail, return receipt requested. We suggest also sending a copy of that communication by fax, email and/or first class mail so your customer’s receipt of it is ensured and expedited. Too, some people think they accomplish something by refusing to accept or claim certified mail and substantial time may elapse before you learn that your letter was never accepted or claimed. Generally speaking, delivery is deemed to occur when an addressee refuses delivery.

Filing a lawsuit for overdue debt collections

This written demand also perfects your right to recover attorney’s fees for overdue debt collections. It is not necessary that you employ an attorney to present your claim to your customer. This can be done easily by you, thereby saving you the expense of attorney’s fees. In this letter, you should state that if filing a lawsuit becomes necessary, you will sue the customer for prejudgment interest due (this is a statutory six percent per annum rate in the absence of any contrary agreement), court costs, and attorney’s fees. If the account is less than $10,000 and you cannot or do not wish to employ an attorney, you can represent yourself when filing the claim in a justice of the peace court.

If you are engaged in construction or a related enterprise, timely management of your accounts receivable also helps you perfect your right to file a Texas mechanics and materialman’s lien (M&M Lien). In these professions, there are strict requirements that must be met in order to qualify to file the M&M Lien affidavit.

If your account is experiencing serious financial difficulty, their filing bankruptcy is always a possibility. You can reasonably infer that your account may be in arrears with other obligations also. Therefore, you may be in a situation of “early bird gets the worm,” dictating that you must proceed with all haste – “the wheel that squeaks the loudest gets the grease” is another old, but true aphorism!

Read more about debt collections and M&M liens