Do I wait or do I Sue? The Debt Recovery Dilemma

One of the most important aspects of running a successful enterprise; yet one of the most painful exercises known in business, is ensuring that your clients pay your invoices.

We've all been there; you provide goods and/or services to your client, at an agreed rate, with payment terms agreed; yet when the payment is due, or when it is time to reconcile your accounts, you find that your client has given you......Nothing!

Typically; at this point, reminder notices are sent, telephone calls are made, promises of payment dates are given and these promises are broken.

As more time passes without receipt of payment, feelings of anxiety heighten and it can be difficult keeping a level head.

One of the questions I am often asked; indeed one of the questions many people ask themselves is, "should I continue to wait for the client to make the payment or should I initiate legal proceedings to recover what is owed?".

It is a difficult questions to answer and depends entirely on your business model, your cash flow, your relationship with your client and more.

However, even in evaluating the best course of action, it can be difficult making the right choice.

For instance, even this firm has experienced this conundrum, and we are professionals in the field of commercial debt recovery!

For example; several years ago a dear client of ours (A law firm) began to be slow in communication. None-the-less, we completed several investigations for the client as instructed.

Invoices were sent out...and the waiting began.

Being in the field of debt recovery, our terms of service are quite strict, as we have seen how poor terms of service and poor adherence to these terms and translate to overdue invoices and poor cash flow.

Our usual accounts receivable process includes the provision of reminder notices following the date of due payment through to a final notice, at which time the client is advised the next step in our process will be to commence legal proceedings.

Many businesses are reluctant to provide such strongly worded letters to their clients, for fear of damaging the client relationship.

However, we would argue that any relationship in which you have to wait past your terms of service or invoice due dates have already been damaged.

Ultimately, we had to pursue the matter with our client further and we eventually were paid, but by the end of the affair the damage to the relationship had already been done.

Having to go through the process again, I would say we were too lenient on the client and should have acted more decisively earlier. We had noticed the slow communication before we had sent our invoices to the client, but we thought we could trust the client due to the ongoing relationship. Not a very clever decision.

Sure, the relationship with the client was damaged, but that eventually happened anyway. At least we could have received monies owed earlier and we could have used the time wasted on chasing old debts to start new relationships!

So, to sum up, our advice is as follows:

Implement strong terms of service and ensure your clients know when you expect to be paid

Have a reminder system in place for accounts receivable

If your client continues to ignore your requests for payment and final notices; sue, sue, sue! Don't wait!

Don't get hung up on being scared to anger your clients by asking for (Or even demanding!) payment.

Now, if account's receivable makes you want to pull your hair out and you are uncomfortable initiating the process yourself, get in contact with Periscope Investigations and ask us about our Commercial Debt Recovery service

Now, you're probably thinking "If the person is not located, I don't pay a cent. I've got nothing to lose" right? Again, such things in life are not always so simple.

If you require a particular star witness to be located to enable you to succeed in a litigated matter; or you need to locate a debtor to enable effective recovery for yourself or your client, can you afford NOT to locate this party? Think to yourself; what is the cost of NOT successfully locating this party?

If you are given a false negative (That is, told that a person impossible to find, when they could be readily located using more sophisticated investigation techniques) you could be losing tens of thousands; hundreds of thousands; or even millions of dollars.

Another point to keep in mind; many firms offering "No Locate-No Fee" services rely on high turnover to remain viable. Such firms are unlikely to expend large amounts of time and resources in matter which are not commercially viable for their business. What does this mean for the client?

For one, the standard operating practices for such firms involve little more than conducting database searches utilising any known details you may have provided at the commencement of the investigation and maybe placement of telephone calls. If there is no direct match in available databases, the result is often a "non-locate". In fact, we have even heard stories from database providers of investigators calling in to complain that the databases do not contain enough information to provide an easy locate.

Secondly, such services rarely include comprehensive face to face HUMINT (Human Intelligence) gathering as a tool. This fact greatly diminishes the investigative data available for use within the investigation and is often the key failure point in unsuccessful skip tracing investigations.

On the other hand, if location details for the Subject of the investigation are readily available within the investigator's databases and the investigation is completed expediently, the costs of the investigation can be less than the fees associated with "No Locate- No Fee" services.

The greatest negative impact to the client comes as a result of "false-positives". That is, when a database lists a person at a particular location and the investigator passes this information on to the client as a "locate" without verification. It is often the verification process that takes more time than the database investigative resource utilisation process. When the investigator is only paid when a party is "located", the possibility for lax verification processes increases.

With a location success close to 100%, we at Periscope Investigations are the experts in Skip Tracing and Location-of-Persons investigations. As the experts, we would caution any party seeking such services against blindly utilising "No Locate- No Fee" providers. We communicate this warning from experience, as we routinely receive matters to investigate where previously engaged investigation firms have failed to locate a party. Yet, we have been successful in doing so.

Where costs are a major consideration, specialised practices can be utilised within the investigation to keep costs to a minimum and the client can be updated as to leads obtained throughout the investigation, so as to assess the viability of continuity in the investigation in relation to costs.