If you know our company, then you are aware that for the past 27 years we have been advising companies on what we call “the Seven Deadly Mistakes in collections”. These are the most common and serious mistakes that we have seen in credit collections. Recently, we held a webinar on these mistakes and plan on holding another one very soon. For those of you who missed it, here are the two mistakes that have proven to be the most destructive for our clients and how you can avoid them.
The first deadliest mistake is not getting something signed. This has become such a serious issue that some states have passed legislation that requires every business relationship to have a signed contract. Why is this so important? The best way to demonstrate the gravity of this mistake is through an example: We had a client that provided high-end consultants to a client of theirs. They were owed $24,000 in past due credit and their client tried to get out of paying by canceling their services. Our client had originally presented them with a contract that stated in the case of cancellation there was an additional fee added to the amount they were owed. Unfortunately, they never got that contract signed and were having difficulty collecting what they were owed. We were hired to help them go after their client, but we quickly ran into issues. How can we argue for collection without a signed contract? Since there is no legal evidence, it became a battle of he said she said.
A little sub-section to the first deadliest mistake is if you are presented with a client’s master service agreement, know what exactly you are signing. Always have an attorney look at any contract before you sign it because these kinds of agreements can put your business in a bad situation. We have seen cases where the agreements became almost punitive.
The second deadliest mistake is when clients do not know exactly who they are working with. We have seen countless times that clients think they are dealing with one company, but it is actually the holding of a larger company. This is especially important if for some reason you go to litigation, you need to know who to sue. It is not enough to have contact information because if John Doe is not answering and on the run, we cannot sue some random person in some city. John Doe is a small part of the business and if you do not know exactly who runs the company or if it is part of a larger corporation, you could sue the wrong entity which opens you up to serious liabilities. When working with a potential client on terms of an agreement or a credit application, go on Google search or check with the Secretary of State to see if the company is listed and to verify who you are actually working with.
Now that you know the two deadliest mistakes, join us for our webinar on the top seven deadly mistakes! It is the best 45 minutes that you and your employees can spend, and it may save your business from serious trouble in the future.
Quote 1: Always have an attorney look at any contract before you sign it because these kinds of agreements can put your business in a bad situation.
Quote 2: When working with a potential client on terms of agreement or a credit application, go on Google search or check with the Secretary of State to see if the company is listed and to verify who you are actually working with.