Collecting in California from Out of State Accounts

USA Map - Collecting Debts in CA from Out of State Accounts

If the debtor is out of state, should you sue here or hire a lawyer in their state?  We generally recommend that California creditors start where they are located.  The legal rules of where you can sue (subject to exceptions) usually make courts where 1) the contract was formed, or 2) where the contract was to be performed are the proper place.  Contracts are performed where the money is payable.  If you sell goods to an out of state debtor or do work for an out of state debtor, their duty is to pay you where you are, namely in California.

So basically you can sue in California.  Since most cases pay or settle,  its’ worth starting in California.   This is especially true if your debtor does any other business in California, has accounts in California who owe it money or  doesn’t want a judgment against it.  

If your debtor doesn’t pay, doesn’t respond or doesn’t acknowledge, it’s doubtful they will hire a California attorney to defend a case.  The result is that the creditor will generally win a judgment without opposition.  This avoids difficulty of trying to prove your case out of state.  You won’t have to hire a lawyer out of state.  You won’t have to send witnesses out of state, You won’t have to risk being “hometowned.

If the debtor doesn’t pay even after a Judgment is entered, the solution is transferring your California Judgment to the state where the debtor has operations or assets.   This is called a “Sister State Judgment”.   You can take your California Judgment to any of the other 50 states and it will be recognized as a judgment there.  No need to start a new case or offer proof or witnesses. 

Measuring ADO for Creditors

Most business-to-business debt is monitored and collected on a monthly billing cycle.  Most vendors send invoices with payment terms detail such as “net 30”,  a specific date or EOM (end of month).

Generally, open accounts are billed at the end of a month for the monthly balance owing.  Creditors get teach their customers they will wait 30 days from statement to get paid. Some Creditors bill on an invoice basis but send an EOM Statement of Account.  The terms on the Invoice contradict the EOM statement.

ADO (average days outstanding) is a key metric used in assessing cash flow and in collection of accounts receivables.  But from when do you start ADO?  From invoice?  From EOM billing?   It goes without saying that the faster your company gets paid after the sale is shipped, the better your cash flow.  A big problem is that frequently the accounting department, the sales department and the finance department define ADO differently.  Best Practices requires that everyone in the company work from the same definition of ADO.  

But the decision on how rapidly an invoice or bill is sent isn’t always easy. Who makes the decision varies from company to company.  It seems frequently dictated by the technology being used for billing.  Or the task is done by an Account Receivable Department that wants a specific date so they can balance workflow or human resources.

If the finance department wants an ADO from date of invoice, the technology may resist specific billing in favor of account wide billing.  The “System” may not be  “programmed” for promptest payment.  And if “The System” is programmed to measure ADO from the EOM billing, that may add from 1 to 29 extra days to the ADO.  

Critical event billing is superior for sales that aren’t repetitive.  A billing is generated when a big sale is made.  That becomes day one.  

Start with just the first step.  Conduct a company-wide survey of how each department views the money that is owed. Did it hit their sphere of influence on the day of the order, the day of the sale, the day of the shipment, the day of the invoicing or the EOM?   If you find variance, management must make a decision and implement a policy.  Good Management about all interested parties being on the same page when using a metric of ADO as a cash management technique. 

Greenbaum Law Group LLP is a law firm that collects business to business debts.  See our website at www.collectionlaw.com

© Martin B. Greenbaum  2013 – 2020.

How to Write Your Own Collection Demand Letter

How to Write Your Own Collection Demand Letter

You don’t need a lawyer to write a good collection demand letter. Save your money and write your own collection demand letter following these recommendations.

            Know who to send the letter to. The accounts payable clerk doesn’t have authority to pay. Send the demand letter to the business owner, CEO or President.  Always make it difficult to ignore the demand. Send by multiple means.  A letter sent by mail can also be either attached to an email or incorporated into the email. A fax version can also be sent together with the email and hard copy. A text picture is another way.  The more persistent you are, the more likely you’ll get noticed.

            KISS. Keep it Short and Simple. “Payment of $xxx has not been received”. Don’t let them make you jump through hoops or force you to play the “go fetch” game.  Attach a copy of the invoices, billings, statement of account or other document that shows the balance.  

            Don’t give extended terms.  Shift the burden.  For example, say “If the payment is not received within ___ days, we will understand that as your invitation to (alternatives) suspend your account or refer this matter for collection action”.   Debtors don’t invite you to come after them often.  They will deny and deflect but not invite.

            Remind your debtor of  other consequences. If your contract, credit application, invoices or other documents provide for prevailing party attorneys fees recovery, mention that in the letter. 

            Some content doesn’t belong in a Collection Demand Letter.  For example, don’t whine. Recitations of how many times you called, wrote, sent information or bills, exchanged promises by email, etc. don’t move you closer to getting your money. Generally the debtor takes it personally and adds that to a reason not to pay.

            Similarly,  Don’t insult. Telling a debtor he is dishonest, broke his word, is a scoundrel, etc is counter productive. You don’t like being insulted and neither does the debtor. Generally an insult is a rationalization for allowing a debtor to ignore you from then on. Also don’t threaten disparagement, reports or charges. 

            Don’t offer a compromise quickly.  As soon as you suggest you will take less than the amount owed, the debt becomes a negotiation.  If there is a compromise, let the debtor suggest that. Finally, if your demand letter doesn’t work and all you phone calls have not worked, don’t wait.  Bad debt is not fine wine. It doesn’t get better with age.

If your debt is in California, is a commercial debt over $10,000 and you want recovery, consider our website at www.collectionlaw.com. Your no obligation phone consultation is just moments away.

Debt Collection in California

Collect bad debt in California. Bad debts are not unusual, most businesses experience some bad debt. Take action. Don’t just hope things will change. Send your own demand letters and make your own collection calls.

When those don’t work, hire a collection attorney to sue now, not after more of the same. If your collection calls and demand letters failed engage us as your collection attorney to begin your collection suit quickly. Bad debts don’t age well. If you don’t hire a collection attorney and the other creditors do, your debt won’t ever get paid. collection agencies don’t sue, they just make more calls and send more letters.

The courts aren’t free. There are court filing and process server costs. Anyone who promises to collect without any court costs are just a come-on. Consider the benefits of either contingent fees or hourly fees for your collection. We’ll send you information on both.

At www.collectionlaw.com, you’ll find answers to frequently asked questions. Our contingent or hourly fees are on our website. Call 800-519-0562 for a no obligation review.

Sister State Judgement Collection in California

Enforce your money judgment entered in any state against your debtor in California. Judgments from all American states are enforceable and collectible in California as a Sister State Judgment. 

The Constitution requires all states to honor the judgments of each other and to allow them to be enforced when you have a judgement against a California resident or business or someone who has assets in California we take legal collection action.

The procedures are generally simple and fast. You don’t have to prove your case again with a properly certified copy of your judgment from another state we’ll turn it into a California judgment anywhere in California and will fight to get your money fast. Greenbaum Law Group offer sister State judgment enforcement legal services in California on either contingent or hourly fees.

At www.sisterstatejudgments.com, you’ll find answers to frequently asked questions and our fees clearly shown. Call (800) 519-0562 to have a no obligation information package sent for your judgment collection case, or pause this video and go here for information on starting your Sister State Judgment collection.

10 TIPS FOR COLLECTION CALLS

10 TIPS FOR COLLECTION CALLS

1. Know who to call

Determine the name and extension of the A/P person once and keep it. Get the email also. If repetitive calls are necessary, be nice.

2. Know how soon

You teach your payment terms. If you call when a bill is 30 days late, you just taught that there are 30 extra days in the payment cycle. Call 5 days after a payment is due.

3. Know when

Afternoon calls get deferred to the next day. Be on the short list for today’s action.

4. 2 Views on Content

KISS, Keep it short and simple. No blame! No insults! No emotions! “I’m calling because your account is overdue. Will you pay this now?

Chatty. Listen without blaming and keep the conversation going. Discover the facts or build rapport or become less threatening.

5. Be prepared to respond

Anticipate the usual excuses. Have the responses ready. For example, if told they didn’t receive invoices or billings, have pdf’s ready to email immediately while you are on the phone. Have your statements and A/R balance report handy for past payment application responses.

6. Payment alternatives

Send an email with direct deposit and wire transfer instructions to an account in one of the big chain banks. Describe payment by going to a branch of your bank to deposit. Do you take credit cards? Paypal? Venmo? Zelle?

7. Pick up a check

Fedex, UPS and others will pick up, usually same day if called early. If you are told they have a check for you, ask if you can have (fedex) pick it up that day. If yes, call for a pick up. Eat the cost to get the money if the payment is big enough.

8. Speak through a smile

Few people like collection calls but most people like to talk to friends. They smile when talking to friends. Treat each debtor as your friend and your attitude will come through your voice. People pay more attention to friends.

9. Keep a log

Know when you called, sent letters, what was said, who you talked to and what was discussed. This may not be important now but it could be very important in the future.

10. Make every call a success

You won’t collect on every call so don’t set yourself up for feelings of failure. End each call with an assessment of what you gained from making the call. You can almost always find something positive, even if it is just knowing you must move to the next level.

© 6/2020 Martin B. Greenbaum