How To Rein In Debt
In a September 24, 2007 article, the Wall Street Journal made recommendations on how to rein in debt. The suggestions included cutting off problematic or late paying customers, using software to track the in-house collection process and tying salesmen's commissions to payment of customer's accounts.
All of these are good ideas. For those granting commercial credit and using commissions on sales to pay their salesmen, tying the payment of those commissions or other like compensation to actual collection of outstanding invoices will give salespeople an incentive to carefully underwrite new accounts and assist in the collection process if problems arise. Once slow or no-pay customers are identified, terminating their customer or credit status is also a good idea. If you don't deal with them, they can't cause you problems.
We also recommend use of credit applications and agreements setting forth terms for payment, enhanced interest rates on delinquent accounts, attorney's fees, choice of venue for suits, waivers of and jury trial and some defenses and other similar concepts. These agreements, coupled with requiring that personal guarantees be executed by the debtor's principals and spouses for debt being incurred by corporations and limited liability companies are among the best ways to ensure debt can be collected. Banks and the SBA require these, why shouldn't you? We can help with these types issues, so contact us to discuss your specific needs.