The Covid-19 pandemic along with the previous lockdown in the majority of states led to a significant disruption in businesses across the United States, which unfortunately forced profitable businesses into financial distress. How long the covid-19 pandemic and the economic effects of it isn’t clear and with the uncertainty of what lies ahead, maximizing the collection of business debts is a priority for many businesses. Although the global recession has put a significant amount of pressure on the operations of your business, collecting business debts is the lifeblood of your business. The majority of, if not all states have lifted the ban on the collection of business debts; however, many businesses are struggling to collect the debts owed, so you may need to utilize a few radical approaches in order to begin collections. Now that the majority of businesses are legally free to begin some debt collections, here are a few tips on how to proceed.
Communicate With Debtors
Communicating and working together is the key to finding a potential solution that will allow both you as a business and your debtors to continue a business relationship in the future. As difficult as it may be, it’s important that businesses avoid aggressive/threatening conversations when contacting their debtors because this will cause a breakdown in communications as well as pose a risk of not collecting the debt. The first and most important step is to make sure you have up-to-date contact information, including email addresses and telephone numbers. This will ensure you can maintain communication efforts with debtors and allow you to determine which debtors are honestly dealing with financial distress and which debtors that may just be refusing to pay their debts.
Payment Arrangements
If the debtor is truly facing financial distress as a result of the Covid-19 pandemic, you may want to consider payment arrangements with your debtors. In many situations, debtors really want to pay the debt owed to your business, but they are struggling with large upfront payments, so accepting a realistic payment plan will allow your business to collect the debt owed. Even if it is at a slower pace, accepting payments is an alternative to no financial gain for the businesses. It is important to closely monitor the circumstances of the debt and the debtor’s ability to pay.
Obtain Legal Advice
Businesses of all sizes are looking for proactive ways to recover debts, not only because it is funds owed to them, but it is also a priority for maintaining a positive cash flow for the uncertainties that may lie ahead. If your business has any concerns about a debtor’s ability to repay, it may be wise to hire a skilled collections attorney. Seeking legal advice and representation early on may help to reduce the risk of potential time-consuming as well as expensive litigations in the future. Unfortunately, many businesses are hesitant about involving an attorney because they worry about the cost; however, the majority of attorneys will provide a free initial consultation and allow fee arrangements that in the end will save both you and your debtor money and time.
When there is a high risk of your debtors delaying their financial obligations, recovery of your debts owed may become impossible. However, obtaining attorney representation and beginning legal proceedings will provide you with an opportunity to significantly increase your chances of debt recovery. Court systems are actively dealing with claims and there are various methods of debt collection enforcement available, some of which you may not be aware of without consulting an attorney that is experienced in collections.
Although the government understands that the covid-19 pandemic may be a debtor’s reason for non-payment, they are equally understanding of the businesses that are experiencing financial difficulties as a result of their struggles to obtain funds owed. Hopefully, the financial difficulties caused by the Covid-19 pandemic and prior lockdown will soon begin to be alleviated as states are returning to work, but in the meantime, knowing what your options are and utilizing the appropriate debt recovery methods are more important now than ever. The future of your business relies on you taking all steps necessary to recover debts owed in the most beneficial and understanding way possible.
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