Thomas P. Kimmitt, Jr.Partner,Whiteford, Taylor & Preston, LLPWith all of the news coverage on the troubled economy, it is moreimportant than ever for businesses to take advantage of opportunities and to protect it against unnecessary costs and expenses. The following are some tips to consider in transacting your business.
1. Invoice Terms. When engaging in business-to-business transactions, the Terms and Conditions on your invoices can be critical to the success of future collection proceedings. Be sure that your invoices, contracts, and Terms and Conditions include provisions giving your business the ability to collect attorneys’ fees (whether or not a court action is filed) and court costs should it be necessary for you to take legal action to collect accounts receivable. Doing so does not guarantee that you will be able to collect these amounts, but failing to include such provisions assures you will not collect these expenses.
Also, be sure that your invoices, contracts, and Terms and Conditions include both clear payment terms and specific penalties for late or defaulted payment. Keep in mind that consumer transactions may require specific provisions and disclosures not required in business to business transactions.
2. Court Collections. In Maryland it is possible for a corporation to collect receivables and debts due it without using an attorney if the amount of the obligation is less than Five Thousand Dollars ($5,000.00). In that case, any representative of a company can file a claim in Court on behalf of the company and actually proceed to Court to collect those amounts. Small claims are filed in the District Court of Maryland. You should find the address of the District Court closest to your place of business. The Court clerks will be able to help you with appropriate forms and procedures for filing such claims. Designate one individual in your office, generally someone who handles accounts receivable, to be the person who files and prosecutes such claims.
3. Collection Letters. Be sure that you are prompt and consistent with the collection letters and notices that you send to your clients. Statistics show that the older an account receivable becomes, the less likely it is to be collected. Keep in touch with your customers and be sure that you are updated regularly on the status of receivables. Be prepared to move a customer to C.O.D. or to stop deliveries to a customer who perpetually ignores your inquiries or will not give you a plan for payment.
4. Workers’ Compensation. At some point in time, your business is likely to have one or more workers who become injured on the job. In order to save yourself both lost employee hours as well as increased Workers’ Compensation insurance premiums, it is important that you stay in touch with and follow up with injured workers. Statistics verify that evidence that the Company cares about an injured worker in many instances will reduce the numbers of days or work missed by the particular employee. Also work hard to be sure that the work environment is a safe environment. Generally, your workers’ compensation insurance company will help you with identifying improvements which can be made to the safety in the workplace and thereby reduce injuries.
5. Unemployment Claims. Unfortunately, sometimes one of the effects of difficult economic times is that employees must be terminated or laid off. It is the tendency of employers to want to assist their employees in receiving unemployment benefits. Employers should keep in mind that when responding to unemployment claims, they should be truthful with respect to the reasons for employee terminations. Sometimes tough economic times force employers to make decisions that they have otherwise delayed regarding termination of employees with poor performance. Failure to adequately explain to the Unemployment Office that a termination of an employee was for poor performance, for lack of attendance or the like, could result in additional problems for the employer later, especially if the former employee files a legal action for age, sex, or race discrimination. Employers who acquiesce in the receipt of unemployment benefits relating to an employee actually terminated “for cause” leave themselves open to future claims and may find that its responses to an unemployment claim have in some way prejudiced its ability to defend itself in other litigation.
Although following these tips cannot eliminate the difficulty of doing business in tough times, they can assist companies in saving and collecting its dollars where possible.