My 7 Step Process for Debt Collection

Step 1: The key to all debt collection matters is sufficient and proper documentation. So, first step is making sure you have a complete file. Take a look at this post which sets forth the types of evidence you should have in your file for a breach of contract claim, unjust enrichment claim, or account stated claim.

Step 2: Send invoices and statements periodically and consistently. That means weekly or monthly based on your standard practices.

Step 3: Send a soft demand letter notifying the client/customer that there is an outstanding balance due, the number of days it is past due, that payment is due at this time, and providing them with the quickest means of paying that balance due.

Step 4: After a period of time lapses (say 30 – 60 days) you should have a demand letter sent, that is at least slightly stronger, but still professional. That letter should state the that payment is due immediately, the account is past due and that if they fail to make payment in X days, that you shall refer the account to collections.

Step 5: Refer the account to collections, preferably a law firm. Your attorney will send a demand letter, notifying the customer/client that money is due at this time and if payment is not made within X days, that the attorney is authorized to proceed to collect the debt.

Step 6: When a demand letter from a lawyer fails, I like to send a letter with a Summons and Complaint attached to it, indicating that we are serious about moving forward if payment is not received immediately. I find that a demand letter in and of itself doesn’t do that much 60% of the time.

Step 7: Commence a lawsuit. Hopefully you have a contract that contains some of the key provisions to help you collect debt and minimize exposure, such as the provisions mentioned in this post here.

Debt collection isn’t a one-size fits all but this guide is a great first step in helping you put together a proper debt collection procedure and process.

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