Corporate

Collection litigation valid option when invoice remains unpaid

By AdvocateDaily.com Staff

Although the thought of collection litigation may seem daunting or bring negative connotations for some business owners, those who have provided a good or service deserve to be paid, says Toronto business lawyer Inga Andriessen.

“It really should just be all about business but somehow, when it comes to collection litigation, getting someone to pay you for something you’ve done or provided sometimes seems to come with a bad frame over it,” explains Andriessen, principal of Andriessen & Associates.

“It’s not a bad thing, and I think that’s one thing that businesses need to be aware of. Sometimes companies are reluctant to move to collect money that’s owed to them. One of the phrases that often comes up is, ‘I don’t want to sue that company or person who owes me money, because they’re one of my biggest customers.’ To which I say, ‘If they’re not paying you, you’re not actually making money off of them,’” she says.

Although some businesses may also be reluctant to sue because of concerns about their reputation in the greater community, fears over losing actual paying customers, or someone going after them on social media, the short answer is that they shouldn’t be, says Andriessen.

“If someone were to go after you on social media for pursuing someone who didn’t pay you, the simple answer is ‘We provide services, and we expect to be paid,’” she tells AdvocateDaily.com.

In terms of when to pursue collection litigation, Andriessen says this is partly guided by bank financing.

“If you are financed, the bank won’t finance receivables past 90 days. So, you need to think about that.”

Otherwise, she says, look to the terms of payment on your invoices, follow up if you haven’t been paid, or early and frequently if you don’t have a good feeling about the customer or relationship.

“We have a trademarked program that we call 30-60-90-Sue®. You should definitely be suing on a receivable past 90 days,” says Andriessen.

In a collections scenario, says Andriessen, business lawyers will start by encouraging clients to reach out to those who owe them money one final time, to let them know they will turn the matter over to their lawyers if payment isn’t made.

“When it comes into our firm, we will frequently do one more demand letter on our firm letterhead. That will often result in payment,” she says.

However, says Andriessen, if the matter ends up going to litigation, business owners can help lawyers by ensuring they have their paperwork in order, including contact information for the person who received the good or service.

For example, says Andriessen, any information, such as a credit application with a driver’s licence number on it, can help lawyers find an individual if they’re resisting payment.

In addition, she says, “Make sure that you are able to show that you delivered the good or the service and that you have not been paid for it. If someone’s bounced a cheque on you, make sure you let the lawyers know that as well.”

A business lawyer will also look to see if there is a written contract in place between the parties.

“We approach it from the point of view of ‘Let’s look at your underlying agreement with your customer. Do you have a written contract? If so, what are the terms of the contract?’

“If there is no contract, that’s fine, you can still pursue the debt, it just means that we will sue for a different interest rate than if you had a contract that spelled out one that was higher,” says Andriessen.

Ultimately, says Andriessen, there is nothing wrong with pursuing a debt.

“You deserve to be paid — you’ve provided a good, you’ve provided a service. In my opinion, the only person who should be embarrassed in that type of litigation is the person who received the good or service and didn’t pay for it.”

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