Nobody likes taking legal action with a customer (unless they’ve well and truly wronged you). But there may come a time when you’ll have to take action.
“If you always do what you’ve always done, then you’ll always get what you’ve always got.”
– Henry Ford.
It’s no use calling and emailing and sending a series of letters if you’re not getting the response you want or the action you require.
If all of your efforts for collection have failed, and the customer’s account is now delinquent, and despite you’re best efforts, you still haven’t been paid, then legal is – and should always be – your last resort.
You can handle this matter in-house with your own legal team or solicitor, or you can outsource the handling. This is entirely your choice, and there are benefits – and risks – with both options.
If you do decide to outsource it to a third party or mercantile agent, you need to take some care.
Make sure you have a good understanding of their process: their cost structure, their ability to communicate and what it is they’re communicating to your customer as your representative. Make sure they deal with your customer in a tone and manner you find acceptable.
Before you engage them, meet the agent personally, to get an understanding of the above factors, and of their own culture. Your customer is key, and there is always a possibility they may come back and continue trade.
Ensure any action taken is approved by you. Any action requiring court or legal notices other than a letter of demand must be seen and approved prior to the agent handing it over to their solicitors – all of this will incur charges, and you need to be aware of what these charges are, and whether you agree to them.
If the agent is unable to collect, and statements need to be issued, the cost of this action needs to be weighed up against the value of the outstanding debt, and therefore your approval must be required. Does it make sense to spend hundreds, perhaps thousands of dollars chasing the debt, if the debt is worth only a fraction of the cost? (No.)
If you do refer your outstanding accounts to a third party or mercantile agent, then you need to draft and implement a process both parties can agree to, and then review these accounts on a monthly basis with the mercantile agent.
But most importantly, if you threaten legal action, you must follow through – never make a hollow promise.