Have written agreements with your customers, clients, patients, etc. and make sure they are signed. If you use salespeople in your company insist that they complete your credit applications thoroughly and obtain signatures consistently.
The proper clear spelling of customer’s names is very important. Be sure to make note of middle initials and whether the individual is a “junior” (Jr.), “senior” (Sr.) or the “third” (III), etc.Don’t include terms on the back of your contract or agreement, (at least without reference to all terms on reverse being included, etc.) Preferably, keep all credit terms over the signature line on any printed forms.
Don’t scribble notes on your agreements. If you can’t input data in the computer use a post-it, etc.
Obtain social security numbers. This number is vitally important to obtain information about the debtor, including verifying they are not in the active duty military service (required if a lawsuit is initiated). Having this information helps when issues of identify theft are presented or when an individual with a common name claims the money owed to you is not their debt.
Make sure your credit application or account agreement provides for interest at the rate of 1½% per month or 18% per year. Variations of this such as “the maximum amount allowed by law” or the “highest legal rate” may end up with a 10% interest rate (or 0%) applied by the court in collection proceedings. Interest rates over 18% might be termed usurious and will end up being reduced to 10% or none by the court.
Make sure your written agreement provides for the imposition of reasonable attorney fees and costs in the event of collection proceedings.
Make sure any credit given to an LLC or corporation is guaranteed by an individual. Get a personal guaranty signed – which can be a separate form. Get the personal guarantor’s home address. Get the exact name of the corporation or LLC and check it out on the Secretary of State’s Website (www.concord-sots.ct.gov/).
Structure your credit forms so that the signature lines indicate that the person signing below personally guarantees the obligations of the company. Be wary of principals of limited liability companies or small corporations who will not agree to give a personal guaranty.
Verify home ownership with the town tax assessor of the debtor. This is public information.
Keep a copy of your customer’s check or detailed banking information on file. If they send you more than one check or if they change bank accounts keep a copy of that additional check. Check the name spelling (Jr.’s, Sr.’s, etc) or corporate name and addresses on the check with the account information you have on file.
Have your employees keep accurate phone logs or notes of conversations with your customers or patients. If you don’t have a phone log system in your computer hand written notes will end up being more helpful than no record at all. Train your employees to input data or any contact with the customer for the file.
If the customer makes a promise to pay get them to agree to deliver at least a specific amount on a specific date of each month. Reduce this agreement to writing if possible or have them sign a promissory note – an unequivocal promise to pay a definite sum -where possible.
Review your local newspaper etc. for information about your customers such as property for sale, divorce or death, etc. It is much easier for your staff to monitor and pick up this information than your collection agency or attorney.
If you discover that you do not have a signed credit application (or personal guaranty) in the file ask your customer to sign one. If your customer asks to make deferred payment arrangements require them to sign a properly filled out credit application (or personal guaranty) at that time in exchange for granting them revised credit terms.
Structure your credit applications or agreements to provide lines for co-customers to sign. Where at all possible get both spouses, occupants of property or partners in business, etc. to sign at the dotted line.
Periodically review your customer credit application to keep the language in your agreements up to date and relevant to your business. Shakespaerian formalese is not necessary. If your policy is to no longer provide goods or services on account after default state this in your credit application.
Periodically review your accounts to make sure you have signed completed credit applications on file.
Consult with your collection attorney to review and update your credit applications or agreements.
Separate your consumer and commercial accounts into distinct and separate categories. Special rules for the benefit of consumer debtors do not apply to commercial transactions. Make sure you categorize your accounts appropriately.
Draft language in your commercial account agreements that provides a personal guaranty as well as a waiver of the customer’s right to Notice and Hearing in any Prejudgment Remedy Attachment lawsuit. This allows a lien to be filed promptly by your collection attorney without first obtaining permission from the court, or obtaining a judgment.