What Happens if You Owe Invoices and You Can’t Pay?
Running a business is not an easy feat. Without proper planning, adaptability, skilled leadership, and focus, a business exposes itself to high risks.
According to the Bureau of Labor Statistics, 65% of businesses fail during their first 10 years of operation. The top reason for business failure is the lack of funding and bad cash flow management, but unforeseen circumstances like poor market conditions are huge factors too. Before you know it, unpaid invoices start to pile up and you are at the brink of declaring bankruptcy. If you are just starting in the staffing and recruiting industry, these may not be the words you want to hear but it’s certainly better than blissful ignorance.
In the past, we have helped thousands of businesses collect past-due debts which improved their cash flow management, so we know firsthand that every time you fail to collect your fees from your debtors, you fail to pay your invoices too.
If you would like to increase your chances of getting paid, read our previous blog on the 5 things that you should never say to a debtor.
First off, we want to remind you to get in touch with your creditor and never give them the silent treatment. Try to work out a deal such as a stretched-out timeline for the payment, because if you choose silence, you will only lead them to think that you are not interested in settling your balances.
Now, what happens if you owe invoices and can’t pay?
• The debt will be forwarded to collections.
As a collections company with 30 years of experience in the staffing and recruiting industry, we know the ins and outs of what happens when there are unpaid invoices. The first thing that a creditor usually does when they can’t collect is to forward the debtor over to collections. During this stage, the collections agency will try to resolve the issue within 30 to 45 days. As required by the law, every offer that a debtor makes, no matter the amount, should be made known to the creditor. If the issue remains to be unsettled, the matter will be forwarded to a lawyer.
• The issue will be forwarded to a lawyer.
The lawyer then will verify all the necessary information including the official and complete business name of the debtor and sends a demand letter as an attempt to resolve. If the move is unsuccessful, there will be 30-40 days increments of filing before a court date is set.
• The case is now considered a lawsuit.
The most important thing to remember once you are served a court common is to not ignore the lawsuit and be responsive. Otherwise, you will be served a judgment before you even make your case.
• The court will render judgment.
The court’s objective is not to prove that you owe the creditor but, in most cases, they just need to prove that the judgment was acquired legally.
Depending on the state, once a judgment is rendered, the collections company can take the money directly from your account.
Conclusion
As a business owner or manager, it is your responsibility to review your invoices and, if you can’t make payment, make sure that you reach out to your creditor to work out an arrangement. Going silent is not the route to take if you have unpaid invoices. Make sure that they are aware of your intention to pay so they wouldn’t have to forward you to collections which may eventually lead to court.
We have been collecting staffing and recruiting debts in the past 30 years and we are the utmost experts in the industry. If you want to place an account, please fill out this webform and we’ll reach out to you. We have a No Collection, No Charge policy, so working with us is better than risk-free.
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