Collections 101
Posted by Bill Molesworth
Fred Hacker introduced Damien Rogers who has been at HGR for two months. Damien has moved from Toronto, where he was with Cassells, Brock, to Midland to take advantage of the lifestyle here, especially canoeing. His fiancee is hoping to move up in the fall. Damien had less than 24 hours notice of this 'opportunity'.
Damien said his practice focused on litigation law in the construction industry, that he enjoyed canoeing and photography and that he was sure his girlfriend would be interested to hear that she had been upgraded to fiancee.
He said his work focused on helping people get paid and there are three avenues - diligence in establishing accounts, securing accounts and collecting them.
When a company first enters into a business relationship it should establish whether it's with a corporation or an individual, what its proper name is, who has ordering authority and whether credit is to be extended. Even an invoice is credit and the issuing company should know in advance what its limits are. Research the credit history of the company you are dealing with and check.
The first early warning sign is when a customer approaches his limits, so it's important to establish those. Should you require a deposit? If you're going to charge interest on accounts that has to be clearly stated in advance, not after the account is overdue. Get your lawyer to help you early and avoid trouble down the road.
A Security Agreement is very common but both sides need legal advice when entering into one. Check whose responsible - in a small family business is it the principals? In a large firm is it a subsidiary or is it the parent? Leins can be applied in construction but it has to be done in 45 days and it takes 30 to be in default. That doesn't leave much time to act.
If they still fail to pay move quickly. The longer you wait the harder it is to collect. In Ontario you have two years to sue but you must have a paper trail. Your lawyer will start with a demand letter which has about a 10% success ratio. Or you can go to court - small claims under $10,000.00, Superior Court up to $50,000.00. These are generally summary procedures and fairly quick but once you get over $50,000.00 it gets more complicated.
Less than 5% of cases end up in trial - there's negotiation, mediation and a judge conference. The loser is usually assessed at least some of the costs. The problem is that the judgement has to be enforced - is the money there?
Claims in other Provinces can be complicated - where's the best place to make the claim? Are there assets here?
Preparation and attention are the keys to fewer default accounts.
Barry thanked Damian for giving such an interesting talk at such short notice and for useful reminders that everybody should take note of. He welcomed him to Midland.
He said his work focused on helping people get paid and there are three avenues - diligence in establishing accounts, securing accounts and collecting them.
When a company first enters into a business relationship it should establish whether it's with a corporation or an individual, what its proper name is, who has ordering authority and whether credit is to be extended. Even an invoice is credit and the issuing company should know in advance what its limits are. Research the credit history of the company you are dealing with and check.
The first early warning sign is when a customer approaches his limits, so it's important to establish those. Should you require a deposit? If you're going to charge interest on accounts that has to be clearly stated in advance, not after the account is overdue. Get your lawyer to help you early and avoid trouble down the road.
A Security Agreement is very common but both sides need legal advice when entering into one. Check whose responsible - in a small family business is it the principals? In a large firm is it a subsidiary or is it the parent? Leins can be applied in construction but it has to be done in 45 days and it takes 30 to be in default. That doesn't leave much time to act.
If they still fail to pay move quickly. The longer you wait the harder it is to collect. In Ontario you have two years to sue but you must have a paper trail. Your lawyer will start with a demand letter which has about a 10% success ratio. Or you can go to court - small claims under $10,000.00, Superior Court up to $50,000.00. These are generally summary procedures and fairly quick but once you get over $50,000.00 it gets more complicated.
Less than 5% of cases end up in trial - there's negotiation, mediation and a judge conference. The loser is usually assessed at least some of the costs. The problem is that the judgement has to be enforced - is the money there?
Claims in other Provinces can be complicated - where's the best place to make the claim? Are there assets here?
Preparation and attention are the keys to fewer default accounts.
Barry thanked Damian for giving such an interesting talk at such short notice and for useful reminders that everybody should take note of. He welcomed him to Midland.