Customer-facing businesses in Indiana must ensure that the consumers of their goods and services pay their bills promptly.
After all, if a business cannot convert its work into income, it will not be able to operate profitably and could wind up in financial trouble.
Many Indianapolis business also have commercial accounts with other businesses, and some may deal almost exclusively with other businesses.
Just like individual consumers, other businesses can run into financial problems, and become unwilling or unable to pay their bills.
As with consumer bills, preventing collection problems upfront can ensure that an organization gets prompt and full payment on its commercial accounts.
One piece of good news is that in most respects, other businesses enjoy fewer legal protections from collection actions than do individual consumers. For example, the federal Fair Debt Collection Practices Act, which applies in Indiana and other states, only protects individual consumers, not financially distressed businesses.
Good contract drafting is often the best defense against unpaid accounts
Here are some tips a business can use to prevent losing revenue on an uncollectible commercial account:
- A business should appropriately vet their potential commercial customers before agreeing to sell goods or services. As is the case with an individual, businesses that are showing a history of not paying their bills on time or signs of instability are more likely to pose collection problems.
- Indiana businesses should make sure their contracts are clear on the terms and details of how much payment is due and by when. On a related point, the contract should also specify what the customer can and cannot do if they question or dispute their bill.
- The contract should also spell out what the business’s rights and obligations are if a commercial customer does not pay.
- For example, the contract can include items like penalties for late payments. The contract might also allow the business to cancel the contract and could allow the business to recover interest and collection costs, including attorney fees.
- In addition to the contract, depending on the size of the account, the business might need to take a security interest, a deposit, or ask the owner to sign a personal guarantee to make sure the business recovers at least some of its money.
Basically, careful contract drafting goes a long way in making sure a business gets paid on commercial accounts.
