Are you a business owner with unpaid invoices or slow-paying clients? Cash flow is the lifeblood of all businesses.  Your customers MUST “Show You the Money” promptly when you deliver your products or services.  Unpaid invoices can be life-threatening. To avoid these challenges, explain your expectations clearly and upfront. Before agreeing to provide products and services to a customer:

1. Check out the client. Do they have a good financial reputation? Have they been in business long?  When you bill or invoice a client, you are extending credit to them.  Before making a “loan,” get to know them and see if they have the ability and resources to pay you.
2. Communicate clearly and document everything. Setting clear expectations in writing before extending the credit is essential to proving that the customer owes the debt to you.  What are the payment terms (how long do they have to pay your invoice (10 days, 30 days, etc.)); is there a late fee; is interest owed on late payments; do they have to pay attorney’s fees; etc.?
3. Create a legally binding business contract.  Hire an experienced qualified attorney to write up a standard business contract tailored to your business.  If you are going to be able to collect everything owed, you must have the terms clearly set forth.
4. Require a Security Deposit.  Ask for a Security Deposit up front for clients that you do not know or if you are unsure whether they can pay you upon delivery.
5. Set and follow a procedure for collection of payment.
   • Invoice promptly and on a regular schedule in writing
   • Give incentives for paying early and penalties for late payments

If your client does NOT meet your established obligations:

1. DON’T harass them. Treat your customers with respect.  Many customers have good reasons for not paying, and, given respect and understanding, will be glad to start a payment plan.  Of course, do not threaten violence or use profane language. Remember, they can record or video your conversations.  While the Fair Debt Collection Practices Act generally applies to third-party collection agencies, it can apply to businesses collecting their own debts.  The best practice is to know and comply with the rules of this act.
2. DO send collection letters.  If your discussions or communication are not effective, then send them a letter promptly.  The older a debt is the harder it is to collect. You need to act quickly to ensure that you maintain your right to the money owed.
3. Be persistent and consistent. Persistently sending bills and reminders on a regular basis will usually increase the likelihood you will get paid in full. Don’t wait until the end of a month to send reminders or past-due invoices, send them as soon as they are due.
4. File a claim. If you are owed less than $15,000, file a claim in Magistrate Court.
5. Hire a debt collection agency. If your standard practices don’t succeed, then it’s time to hire a professional. Debt collectors write demand letters and track down debtors daily, so they are really good at it. Just be sure to hire a reputable agency that complies with FDCPA. If you hire a non-compliant, non-reputable agency, you could get sued and you probably won’t get your money anyway. If you need an agency, you might want to check out Commercial Law League of America’s list of certified agencies.
6. File a lawsuit. If the debt is more than $15,000, hire a qualified attorney to file a lawsuit.  In reality, most businesses should never reach this point. However, if your business routinely deals with amounts equal to or greater than this, it could happen despite your best efforts.  If it does, properly completing all the prior steps listed above will greatly improve your chances of winning a lawsuit. While it is expensive to sue, most lawyers will handle your case on a contingency basis, so you only pay if you get paid.

Prevention is the best way to make sure your clients and customers “show you the money.”  While you may have to invest some time and money upfront, the return on investment could be exponential.

Are you thinking about loaning money to your kids or grandkids? An aging parent? Or maybe to a friend or other family member? While the intent is to help, remember that mixing love and money can easily become a difficult situation if either party fails to meet the other’s expectations.  Many such loans end up damaging relationships and straining finances if the borrower is unable to or refuses to repay.

Surprisingly, people are far more likely to get in a legal dispute with a former loved one than a stranger. That is why my grandfather advised me to just give what you can to loved ones and let them borrow money elsewhere.

Being an attorney, I’ve learned that the best practice is to document and loan money in the same way a bank would. This practice not only protects you, but it also can be a valuable and practical life lesson for your children or grandchildren.

Before making a financial commitment:

1. Do your homework. Before loaning to a friend or family member, schedule a meeting with them. During the meeting, ask key questions about their income and assets, just like a loan officer at a bank or car dealer would. For example, What is your collateral? What is your financial position? How much can you repay and when can you repay it? In fact, pulling out a copy of the last loan you took and utilizing those questions is a very good idea. Not only will you get better insight into their capabilities to repay, but they will learn about how the loan process works.
2. Communicate clearly and document. Setting clear expectations in writing before loaning money greatly improves the likelihood that your loved one will repay as expected. Take the time to write down all the details of the loan i.e. amount, collateral, and repayment schedule. For car loans – complete the back of the deed. To have legal recourse,  your best option is to hire a lawyer to draft:
   • A promissory note.
   • A Deed to Secure (which you should in the Deed records to establish your priority against creditors or their heirs if debtor passes.)
   • Take a Car Title to Tax Commissioner and put your name on the vehicle to protect your priority as a creditor.
3. Set and follow a procedure for collection of payment.
   • Email an invoice promptly at least one week prior to the scheduled due date.
   • If desired, give incentives for paying early and penalties for late payments. This system rewards loved ones for doing well and penalizes them for not doing well, just like a bank loan.

If your loved one does not meet obligations:

1. If they miss a payment or are late, immediately schedule another meeting and discuss the situation.
2. Ask questions to determine the cause of the issues and if needed, offer to adjust payment and schedule as needed.
3. If their finances have drastically changed, offer to settle the debt for a reduced price. They get the satisfaction of settling the debt and you at least get something.
4. Document the meeting and agreed upon changes.

If you own a business or have other debts to collect, be sure to read my next article: How to Collect a Debt.

P. S. I hope this article is helpful and interesting to you. Please leave a comment below and let me know if you found it helpful or if there are other topics you’d like to see articles about.

Minimize litigation risk with these common-sense tips.

Nobody wants to get sued or to have to sue, but it can happen to anyone. It’s natural to be afraid or nervous. Follow these common-sense tips to ease your mind and likely reduce your risk of excessive judgment.

• Accept Responsibility. If you are wrong, don’t cover it up or blame it on another person. If your actions hurt another, it is best to own up to it. I recommend you retain an honorable attorney and instruct them to work with the other side to reach a fair settlement out of court as soon as possible. An ethical attorney can often act as a mediator to help both sides reach an agreement. Settlements will save you time, money and stress, as well as limit damage to any existing relationship you may have with the wronged individual. A large majority of civil cases are resolved via settlement, most likely for these very reasons. Settlement was the single most common outcome for a civil case (62%) in the Landmark Study conducted by the National Center for State Courts in cases studied from 2012-2013.¹
• Read EVERYTHING. Knowledge is power! Take the time to read anything related to your case, especially if it requires your signature. Never sign anything that you do not understand. In a diplomatic manner, ask questions and require understandable explanations. No question is a “stupid” question (sometimes it is the best question). Only sign when you understand fully why and what you are signing.
• Learn the law. Never let anyone “tell” you what the law is! Research any laws that apply to your situation on your own. Then, if need be, consult your own legal counsel. I am as much a teacher as I am an attorney. When my clients understand the law, then I can better assist them.
• Always document. Keep copies of all important documents. If you have a problem at home, at work or at the scene of an automobile accident, take pictures. Obtain the names of witnesses whenever possible. You cannot prove what you cannot show. Note: The best defense is a good offense. Be proactive and keep copies of all documents involving other people. Put things in writing. Keep copies of invoices. Document dates and times of important conversations. Keep copies of all contracts you sign (after you have read them, don’t let anyone rush you.) After a settlement, do make sure that your attorney obtains a written release of all claims.
• Exercise self-control. The apostle James said it best “…everyone should be quick to listen, slow to speak, and slow to grow angry.” (James 1:19 CEB) Keeping control of your tongue and your emotions is your best defense, because, once you speak out or act out, you have no way of taking it back. Chances are good your actions will be caught on tape as most people have a video camera and recorder with them at all times. Smartphones do not lie. Georgia is a one-party state. If two (2) people are on a phone call, only one has to consent to be recorded.

For centuries, history has admired individuals with great courage and integrity. Men of great integrity take responsibility for their actions. If you have a matter that may involve litigation, retain an honorable attorney with the objective of working things out for the benefit of all concerned. If we all did this, our legal system and the world would be a much better place.

1 National Center for State Courts, The Landscape of Civil Litigation in State Courts (November 2015),   https://www.ncsc.org/~/media/Files/PDF/Research/CivilJusticeReport-2015.ashx