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          Mar
          22
          Minneapolis
          Revenue

          Here’s how to bring home revenue due

          A lagging economy has led to a sharp increase in accounts receivable for many businesses. Customers that once paid within terms are now slipping from first base to second base with some sliding into third.

          Business owners must keep accounts receivable top of mind to bring the money home. This article identifies steps a business should take to collect, both informally and formally, outstanding accounts (and also gives a nod to the baseball season.)

          1. A little practice can improve your average.

          Institution of an accounts receivable management policy can improve your collection of accounts receivable dramatically. The goal of a policy is to ensure payment and reduce the number of delinquent accounts.
          Involve key people

          An effective policy will involve key personnel, including management and sales staff, to establish an efficient invoicing process. It should also integrate sales and credit decisions so they work smoothly in unison.

          Keeping your policy top of mind will help you avoid the pitfall of selling to a company that is not credit-worthy or that will fail to pay obligations according to terms.

          2. Don’t be stranded at third with no way home.

          Many companies use outdated sales contracts, credit applications and invoices. Your documents should incorporate collection provisions that penalize debtors for delinquent payments, charge interest on unpaid balances and require the debtor to pay collection costs or attorneys’ fees incurred in collecting unpaid debts.

          If your contracts do not contain these provisions, consult an attorney to incorporate them.? Unenforceable contracts, poor credit applications and untimely invoices may leave you without a viable way to bring the money home.

          3. Take steps to improve your stats.

          If your business is burdened by delinquent accounts, take steps to collect the debt.

          Informal collection should start when the account is 30 days past termas the likelihood of success is dramatically increased the sooner youtake action.

          Who’s the debtor?

          First, identify the debt and debtor. A business owner should review any sales documentation to determine whether there are provisions that affect collection efforts. While the debtor is typically identified in the sales documentation, other parties may be liable for the outstanding account.

          For example, although a partnership is a distinct entity, all partners of a partnership are generally liable for the obligations of that partnership. But shareholders and officers of corporations are rarely personally liable for corporate debt.

          An owner may personally guarantee payment. Accordingly, it is important for a business to correctly identify the debtor and what remedies may exist against that debtor and others to evaluate collectability.

          Then, start in-house collection activities. Sending past due reminders or calling your accounts directly to offer nt accounts and maintaining the business relationship.? Payment demand letters may also be used.

          Keep in mind the sooner you take informal collection action the more likely you are to bring the money home without incurring the expenses of formal collection.

          If formal collection becomes necessary, a business owner should seek counsel to develop a collection strategy.? Although Minnesota law provides a number of methods for collection, including prejudgment and post-judgment remedies, the first step is to obtain a judgment against the debtor.

          Conciliation court could be called the minor league. It’s an efficient tool to obtain a judgment without an attorney’s assistance. Fees will be lower and delays shorter than district court.

          But conciliation court is not appropriate for every case. An action cannot be filed in conciliation court if the amount in controversy is greater than $7,500.? Also, a conciliation court action must be filed in the county where the debtor resides or where the debtor’s place of business is located.

          A number of resources can assist you with conciliation court, including the guide provided by the Hennepin County District Court(www.mncourts.gov). Keep in mind a conciliation court judgment must be registered in district court before formal collection is commenced.

          District court is the big league. If your company is a corporation it must be represented by counsel in a district court action.? Counsel will draft a complaint to be served on the debtor.? District court actions may take several months to resolve and the costs may be significant.

          Attorneys’ fees may or may not be recovered as part of a judgment.?After a district court action is resolved, you may obtain a judgmentagainst the debtor that can be enforced for a period of 10 years from the date of docketing.

          Collecting a judgment

          There are a number of ways to collect a judgment, including garnishment and execution.

          Garnishment permits a creditor to impound money or property owed to debtor by a third-party garnishee. Garnishment is effected through the service of a summons on the garnishee, which requires the garnishee to hold money or property in its possession owed to the debtor.? These Assets will then be applied toward the debt when authorized by the debtor or levied upon under Minnesota’s execution statutes.

          Execution is the process by which judgments requiring the payment ofmoney or delivery of property are enforced through the county sheriff.?A debtor must first obtain a judgment against the debtor and thenobtain a writ of execution, which is issued by the court and directedto the sheriff to aid in the collection of assets.

          The method of collection for any scenario depends upon the debt anddebtor and you should consult an attorney to determine which method isappropriate for your case.

          Tough economic times have led to a sharp increase in accounts receivable.? These suggestions should help your company bring those all-important accounts receivable home.

          Bryan Feldhaus,
          Lommen, Abdo, Cole,
          King & Stageberg:
          612.336.4389
          bryan@lommen.com
          www.lommen.com

          Bryan Feldhaus

          LOMMEN ABDO
            Bryan Feldhaus is a shareholder at Lommen Abdo. He represents clients in commercial litigation, professional liability litigation, and business litigation. Mr. Feldhaus also recently obtained his LL.M. degree in Corporate Compliance and Organizational Ethics from the University of St. Thomas School of Law. He assists clients in compliance, regulatory and ethics matters, which includes litigating compliance disputes, representing clients in data privacy matters, and advising clients about mitigating compliance and ethical risks. Lommen Abdo tackles the challenges entrepreneurs, closely held and family businesses face today. If compliance and cyber security issues keep you awake at night, Lommen Abdo can help.? We combine legal expertise, practical business sense and a client-centric focus. One client states: “Lommen Abdo provides valuable services at cost-effective rates to their clients. Their knowledge and experience is outstanding and only eclipsed by their compassion and desire to exceed the expectations of their clients.”

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