Collecting overdue invoices is a common challenge for businesses in Houston, Texas. Most of the time, your customers will pay for your goods or services within the agreed-upon time frame. But when someone refuses to pay, it can disrupt your cash flow and threaten the stability of your business. Unpaid invoices are particularly stressful when they are for a large volume of goods. However, even small invoices can quickly add up if they are not paid on time.
The good news is that you can collect overdue invoices from clients. Still, it’s important to do so legally so you can avoid any negative repercussions, such as reputational damage or fines due to violations of consumer protection laws. Here is everything you need to know about collecting overdue invoices in Houston.
7 Steps for Legally Collecting Overdue Invoices
Normal business transactions can become a nightmare when a customer or trade partner refuses to pay their invoices. While you have a right to collect the money that’s owed to your business, there are right and wrong ways to go about it. Here’s what you need to do:
1. Set Clear Payment Terms
Step One involves setting explicit payment terms in your contracts or service agreements. Clearly outline due dates and acceptable payment methods, as well as any penalties for late payment. Your contracts and service agreements should also include dispute resolution mechanisms and notify customers that overdue invoices can be sent to collections.
You must be transparent about your payment terms and adhere to Texas debt collection laws. Violating these laws could damage your company’s reputation and lead to fines or other penalties.
2. Issue Accurate Invoices
If customers receive inaccurate invoices, they can contest the charges. This can delay the payment process and hurt your reputation. Make sure invoices are sent promptly upon completion of services or delivery of goods. Each document needs to be accurate and detail the following:
- Services or goods provided
- Amount due
- Due date
- Any applicable late fees.
Make it easy for customers to pay for your goods and services. Offer convenient payment methods to prevent delays.
3. Implement a Structured Follow-Up Process
You need a plan for addressing overdue invoices. Assume nonpayment is going to happen, because it will. Here’s what your follow-up process may look like:
- Send a polite reminder immediately on or after the due date.
- Send a second notice marked “Past Due.”
- Send a final notice if the client still does not pay.
The second and final notices should outline what actions you are going to take if they fail to pay the invoice. For example, you may sell the debt to a collection agency so you can recoup a portion of the lost revenue.
4. Understand Texas Debt Collection Laws
Make sure you familiarize yourself with the Texas Debt Collection Act (TDCA) and the Fair Debt Collection Practices Act (FDCPA), which is a law at the federal level designed to protect consumers from unfair debt collection tactics. The FDCPA primarily applies to third-party collectors, but portions of the TDCA apply to your business.
These laws outline everything from how often you can reach out to a consumer about a debt to the notices you have to provide. Knowing what you can and can’t do while collecting overdue invoices will protect your reputation and help you avoid fines. When in doubt, talk to a business attorney for guidance.
5. Act Fast to Avoid Issues With the Statute of Limitations
In Texas, the statute of limitations for debt collection is four years. If you are trying to collect a large sum from a client, you may decide not to outsource the process to a collection agency. In this instance, you may need to take legal action against the other party. You have only four years to initiate a suit for debt. After that, you will be unable to file a claim.
The good news is that most unpaid invoices can be resolved through collection agencies or by sending out reminder notices to your clients. However, it is important to consider all of your options, especially when a large sum of money is involved.
6. Consider Using a Debt Collection Agency
Debt collection agencies buy past-due invoices and other debts from businesses and try to collect the money from consumers. This approach alleviates the headache of trying to collect a debt yourself. However, the debt collection agency won’t pay you face value for the invoice. It will typically pay pennies on the dollar, so it has plenty of room to make a profit.
7. Consult With a Houston-Based Business Attorney
A business dispute lawyer can help you address collection issues with vendors or customers. This approach allows you to avoid selling invoices for a fraction of their face value while also giving you an opportunity to legally recoup the money you are owed. Weisblatt Law Firm assists business owners with all manner of business disputes, including overdue invoices.
Weisblatt Law Firm has helped countless clients address business disputes with customers, investors, partners, and vendors. Past clients praise attorney Andrew Weisblatt for his knowledge and service. When you need legal representation to protect your business, Weisblatt Law Firm is here to help.
Are Overdue Invoices a Common Problem?
Protecting Your Business from a Rising Trend of Overdue Invoices
Unfortunately, the answer is yes. According to Stripe, 49% of invoices issued by U.S. businesses aren’t paid on time. Statistically speaking, nearly half of all invoices you issue to clients will probably be paid late. Some won’t get paid at all. This means that you may have to submit them to collections.
It’s not a question of whether invoices will become overdue — it’s a question of how many invoices will become overdue. As a business owner, you have to plan for non-payment and protect yourself by using legally binding contracts. Aligning with an experienced business attorney is one of the best ways to ensure that your invoices and other business documents are enforceable.
Weisblatt Law Firm serves business owners throughout Houston and is here to help you legally protect your cash flow and hold clients accountable for the goods or services you provide.
Call (713) 666-1981 for a free phone consultation with Weisblatt Law Firm. Learn about your options and how attorney Andrew Weisblatt can help.
When Should You Talk to a Business Attorney?
Many business owners wait until they are facing a complex legal issue to talk to an attorney. While that’s certainly a time to bring in a legal professional, waiting until you have a problem can make finding a resolution more difficult.
A proactive approach is best. You should talk to a business lawyer when forming your business so they can review contracts and identify any gaps that may turn into legal issues down the road. An experienced attorney can also ensure your contracts are legally binding and enforceable should a customer default on an invoice or otherwise violate the terms of an agreement.
Have you already formed your business and actively engaged in transactions? Now is the perfect time to speak with a business attorney. Weisblatt Law Firm focuses exclusively on business law and serves clients throughout Texas.
Weisblatt Law Firm can help you protect yourself from nonpayment and other contractual issues that could hurt your cash flow.
Need Help Collecting Overdue Invoices? Contact Weisblatt Law Firm.
Are unpaid invoices hurting your business and disrupting cash flow? Don’t wait until the overdue invoices pile up. Let Weisblatt Law Firm evaluate your options and help you legally collect the money that your clients owe you.
Call (713) 666-1981 for a free 30-minute phone consultation with Weisblatt Law Firm. You’ve worked hard to build your business; now let us help you protect it.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
