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What should you do if a client owes you money?

On Behalf of | Nov 30, 2020 | Business Litigation

When a customer owes you money, your actions could increase or decrease the chance of getting paid promptly. Perhaps you want to show that you mean business. Threatening legal action lets people know you are not someone to trifle with. While litigation is always an option, it can come at a cost.

Why should you not jump straight to litigation?

Here are some reasons you may want to hold off:

  • It may be an overreaction: Has your accounting department told you the whole story? Maybe there is a reason the client is holding off payment. Perhaps your company is at fault in some way.
  • It may not be cost-effective: Litigation costs money. Unless the amount owed is considerable and your case clear, you could end up spending more than you recover.
  • It may damage your business: Chances are, if you file a lawsuit, the client will start looking for another supplier. A business relationship can take years to build, yet it may take much less to destroy. You could also lose other potential clients if you gain a reputation for being heavy-handed.

There are many ways to encourage the client to pay. Sometimes, all it takes is a direct call from you as owner to the other company’s owner. They may be unaware of the situation and be able to resolve it promptly.

Empathy goes a long way in the modern business world. Many companies have had an extremely challenging year. If, after taking preliminary action, payment is still not forthcoming, consider mediation. While some attorneys jump at the chance of litigation, it is better to have one who understands that sometimes restraint is more effective.