What can we do to recover the money owed to our business?

[rody084]

State: California (selling nationally to different states though)

Hi,

We have a small business of selling arts and crafts which we make ourselves and constantly have difficulties having our clients (usually galleries) pay our Net30 invoices that we have with them. We are not sure what the law permits us to do and what the proper procedure is for us to follow in the recovery of this owed money.

I would greatly appreciate any advice or comments,

Thank you in advanced!

Rody

 

[Chien]

As it's posted, you're really asking a "small business" question, rather than a "debt collections" question. I can't tell if your interest is actually to recover or to accelerate cash flow. Are you owed thousands or tens of thousands by a particular customer in a particular state? If so, people can address what it takes to sue in that state. But if your customers are generally running 30-60 current, you're doing better than many small businesses and most that are doing interstate business. It's a pain for you not to be 30 current, but it's probably more than you can hope for.

Unless you're going to travel around suing customers, scare 'em or seduce 'em. Scare = start printing a prominent notice on the front of your invoice that the balance is due upon receipt and will incur a "late charge" of 1 1/2% per month if paid after xxxx, 2006. Understand that you may not be able to enforce that under the laws of many or most of the states that you ship to, but maybe it helps a bit.

Seduce = the opposite side of the coin. Offer a trade discount of 10-15% for those who pay within the 30-day window. Then, push that aggressively. Before you decide that you can't afford to do that, imagine bumping prices 5% and factoring in everything that you're losing to "slow pays", and you'll probably find that you actually can afford it.

A third option may be to factor your A/Rs. You have run the numbers to decide if that's viable.

Of course, there're myriad additional options to scare or seduce, but we don't know how much you're talking about or where the problem really lies. I'm simply responding to the posted question.

 

[TigerD]

You can also sell your accounts receivable to a factoring company. Most of the factoring companies will delineate the invoice terms they require. I financed a business purchase several years ago by factoring their accounts receivable. Works great. Sign the sales contract, fax it to the factoring company and 24-48hours later you are paid.

DC