Getting Paid

Uncategorized Aug 12, 2017

You may have a client or two who are not prompt in paying their invoices with you.  This is an issue for the cash flow and financial stability of the business.

Here are some tips for collecting accounts receivable now outstanding, and improving the situation in the future:

Check the Contract

Are the fees due clear in your client contract? What about payment terms? Have you provided that interest will be charge on overdue accounts? Should you require a deposit, interim payments at certain milestones, or a credit check?

Follow Up

It is best to have an established practice for following up with clients regarding their overdue account. The invoice may have been forgotten, misplaced or sent to an old address. A follow up phone call may be uncomfortable but is a good way to find out if the client is having cash flow problems or has some other reason why they haven’t paid.

Demand Letter

A lawyer can send your client a scary letter indicating why the debt is owed and when it should have been paid. It will usually state that further action will be taken if the account is not paid by a certain date. This will have some success with certain types of clients.

Suing

You can start a claim to sue for the outstanding amount.

The maximum amount of a claim in Nova Scotia Small Claims Court is $25,000 (not including interest) and the procedures are intended to be less formal and more accessible to self-represented parties (without a lawyer). You can find out more about this court here.

For larger claims, you can start a claim in Supreme Court, but you will likely need a lawyer. You should get an idea of the costs and time that will be required before starting such an action.

If you are successful in establishing your claim in court, you will be awarded a judgment against the party which you will then need to enforce.

Enforcement

Perhaps contrary to popular belief, being successful in court does not necessary mean you will end up with your money. The debtor is not required to hand over the cash or write you a certified cheque before they leave the courtroom. You will likely have to enforce the judgment (order) through the enforcement process. Modes of recovery may include garnishee of wages, seizure of bank accounts, third party demands, seizure of shares, personal property or seizure and sale of real property (land).

As with many things, an ounce of prevention is worth a pound of cure. Once you get to the point of having to collect your client’s money through the legal process, you have ruined your relationship with them and lost a client.

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