Collecting Receivables Part II

How Can I Collect my Outstanding Receivables Quickly?  (Part II)

Last month we discussed how you must be aggressive when pursuing delinquent customers.  Let us assume that you sued the customer and now have a judgment.  What does that mean?

A judgment is a piece of paper that says that someone owes you money.  By itself, it is of no use.  However, it also gives you the right to use certain tools to collect on it.  These are much more effective!

If your customer owns land (in the customer's name), the judgment can be registered with the Sheriff's office.  This will effectively prevent the landowner from refinancing or selling the property without dealing with you.  This can be very effective, but can also mean waiting a long time to get paid.  You can force the sale of the land to get paid sooner, but this is costly and should only be done when the account is very large.

You can seize goods owned by your customer.  Again, this can be costly, and you must ensure that the goods are actually owned by the customer.  On the other hand, it can be very effective.  There is a non-monetary value to having the Sheriff walk into a retail store (for example) and empty out the tills in front of the customers.

There is also a process called "garnishment".  In this case, you can force anyone that owes your customer to divert the money and pay you instead.  This is a very powerful tool that often generates very fast results.  A garnishment can be directed at a bank where your customer has an account.  In that case, the bank will freeze all the funds in the account and pay them to the Sheriff, to pay to you.  Your customer may also be owed money, now or in the future, by someone else.  For example, if your customer is a supplier to another company, you can garnishee that company and have them pay the amount of their invoices to the Sheriff instead of to your customer. 

A garnishment gets the attention of the customer, especially when their bank call them to tell them their account has been drained. Banks do not like customers that can't pay their bills, so your customer is likely to react quickly to take steps to rectify their account.

The Bottom Line: You have to be persistent in chasing your bad debts.  Hopefully, the debtor will tire of the hassle and make satisfactory arrangements to pay your account.