Finance

Collection Protection

Customers owe you money? Find out how to get it.
2 min read
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Entrepreneur magazine, April 1997

When a customer doesn't pay, your ability to collect may depend on how well you protected yourself upfront by using the right language in your sales documents. Those documents include your credit application, sales contracts, invoices and statements.

Attorney Manuel H. Newburger, a consumer law specialist with Barron & Newburger, P.C., in Austin, Texas, offers this advice:

  • State the due date on each invoice. Don't leave any question about when the bill becomes past due.
  • Clearly state the interest rate and terms under which interest will accrue. In some states, the customer must agree to interest in writing; check with your attorney to see what your particular jurisdiction requires.
  • In your credit application and/or sales contract, include a forum selection clause (which states that the debt is due and payable where the creditor is located) and a choice of law provision (which means the law where you are located applies regardless of where the suit is filed).
  • Include a stipulation that the debtor will pay any attorney fees and collection costs incurred at any time, even prior to suit.
  • Get a personal guarantee. If your customers are other businesses, be sure you know who owns the company and have them sign a document that promises to pay you if their corporation is unable to.
  • Have your documents reviewed by an attorney who specializes in creditors' rights to be sure they are in line with the regulations in your state.

Says Newburger, "We have so many cases where if the creditor did even one of these things, we would be able to do more for them."

Contact Sources

Barron & Newburger P.C., 900 Congress Ave., #200, Austin, TX 78701, (512) 476-9103

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