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October 31, 2023 Collections

The Importance of Effective Collections Strategies for Businesses

Whether you are a solopreneur, a CEO of a major corporation, or the owner of a family business, unpaid invoices represent a common issue across the private sector. Without an effective collections strategy in place, businesses may suddenly find themselves dealing with a number of serious issues. As always, it is far better to be “proactive” rather than “reactive” in the business world. In other words, entrepreneurs should strive to formulate collections strategies before they actually need them. One way to accomplish this goal is to book a consultation with an NJ collections attorney. After discussing your specific needs with New Jersey collections lawyers, you can create an effective, personalized action plan. 

Statistics Regarding Unpaid Invoices 

The statistics regarding unpaid business invoices are alarming, to say the least:

  • 60% of all invoices are paid late
  • Over 25% of late invoices are 1-3 months late
  • Almost 75% of businesses say that late invoices stunt their growth
  • Unpaid invoices represent a leading cause of business bankruptcies
  • Over 10% of all invoices are never paid 
  • More than 40% of entrepreneurs do not have time to follow up on invoices
  • Each US small business is owed an average of $84,000 in unpaid bills
  • US small businesses are currently owed a total of $825 billion in unpaid bills

Effective Collections Strategies

Fortunately, there are a number of collections strategies that can help companies resolve these unpaid invoices:

  • Research: One of your first steps should be to research the debtor. Finding out more about the debtor can provide you with the information you need to create an effective strategy. For example, you might find out that the debtor is completely bankrupt. Perhaps they owe money to several other entities. If this is the case, you might want to ask yourself whether it is truly worth investing your time and energy into pursuing a debtor who is completely unable to pay. On the other hand, you may discover that the debtor has assets that can be liquidated in order to pay the sum. 
  • Follow-Up: The next step is to follow up with the debtor and remind them of their outstanding balance. This might seem like a simple step, but it is something that many businesses fail to do. Sometimes, debtors may have genuinely forgotten about the unpaid bill. Following up can provide you with more information about the situation, and the debtor may give you a timeline for payment. 
  • Provide Options: Businesses might also choose to provide the debtor with numerous payment options. If a lump-sum payment is not possible, you might agree upon a monthly or weekly payment plan. With more options, a debtor is more likely to cooperate and provide payment. 
  • Invest in Collections: The truth is that many businesses simply do not have the necessary resources to handle collections while simultaneously overseeing normal business operations. Depending on your situation, you might choose to invest more heavily in collections. This might involve hiring dedicated team members to hire collections. Do the math and figure out whether this would lead to a net profit for your business. 
  • Consider Digital Solutions: If you cannot hire additional team members for whatever reason, you can still invest in digital debt collection solutions. A simple example is an app that sends automatic payment reminders to delinquent customers. These apps can also track payments, streamline invoicing, and monitor outstanding balances. 

If all else fails, it might be time to get in touch with a NJ collection attorney. These debt law lawyers can execute additional collections strategies that involve litigation through the courts. 

The Consequences of Ineffective Collection Strategies

The consequences of ineffective collection strategies are significant. The most obvious consequence is bankruptcy, and this is a very real possibility when you are suddenly faced with numerous clients who do not pay. You might also struggle with cash flow issues that prevent you from hiring new workers, purchasing new equipment, or growing in a sustainable fashion. 

Consult With a Business Law Attorney Today

If you have been searching for collection lawyers in NJ, look no further than Snellings Law, LLC. During a consultation with our attorneys, you can discuss the specifics of NJ debt collection laws and how they apply to your business. From there, you can get started on an effective collection strategy that ensures positive cash flow. Holding your customers accountable does not need to be stressful or complex; you are fully entitled to pursue that which you are owed. Book your consultation today to begin the legal process.