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How to collect a debt

By Julie King |

Michelle asked:

I need to know what I should do. I am a small business owner construction what we do is cribbing forming walls and grade beams I completed a Job over 30 days on completion of job I submited my invoice for the completed work. I have spoke to the company several times regarding payment but still awaiting payment what can I do to get my money that is owed. Both companies are registered in Alberta.

Julie King answered:

One of the unpleasant jobs of running your own business is that you sometimes have to pursue delinquent accounts. There are steps that you can take when collecting a debt that will help you get the money, from carefully documenting all attempts to collect the money (to provide clear evidence if you have to go to small claims court over the matter) to using an outside firm that can help.

One reason to pursue the debt yourself is that you can control the communication with your client during the process. I personally believe in being fair, but firm. The money is owed and you are fully within your rights to ask for payment in full once the work is done. It is also reasonable for you to outline a series of escalating steps to the client, to help the client see that it is better to pay you now rather than see things continue on to court.

Be aware that a very small number of clients are adept at playing games to avoid paying the money they owe. We encountered this once, where a father and son had gone so far as to flip the registered name of the business from one corporation to the other, continued operating under the business name without notifying vendors of the change, and then insisted that they didn't owe any of the debts previously accumulated because they belonged to the first corporation, owned by the son, that had been closed down.

Do not be afraid to move things to small claims court if the client is not living up to their agreements to pay; it is better to move quickly if you think there is any chance of the company going out of business should the process drag on.

It is not difficult to create a small claims court claim, but it is extremely important that you follow the guidelines around processes and dates to the letter. I have seen someone in court have the case delayed because they requested a court date one day earlier than they were supposed to.

The article Getting Paid on CanadaOne can help you establish a simple collections process for your company.

If you find that you need to move things to small claims court, CMHC has an excellent overview of the process that is updated every other year. In addition to having a general overview, you will find information for each province as well. Here is the link to the Alberta small claims court overview:

Often the threat of a small claims court suit, along with the extra costs that would result, is enough to motivate a person or company to pay their bill.

Using a collection agency is another option, but for a small company sometimes the fees and infequency of use make this something you would want to look at only if you find you are struggling to get paid after your own collection attempts.

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