(604) 229-2464

(604) 229-2464

The ABC’s Of Debt Collection For Business Owners: A Lawyer’s Guide To Effectively Collecting Unpaid Invoices & More

Jan 23, 2024

If you’ve been a business owner for any amount of time, you’ve probably become acquainted with the uncomfortable fact that not everyone is as reliable as they seem. The most eager client you bring on may at first seem like a terrific fit, only to become one of your most problematic clients later on; the highest paying client may turn out to always be the latest to pay their invoice.

While sometimes all it takes is a gentle reminder email or a phone call to get clients like that to give you the money you are owed, sometimes that is unfortunately not the case, and you may need to take more drastic measures. Sometimes, you may even need to get the law involved!

You have the right to get paid the agreed upon amount for the services or goods your business provides, but there are specific ways you should go about it (to avoid the matter evolving into a massive legal dispute that ends up costing your company more resources and time).

Because we are experienced debt collection lawyers, we can simplify the way forward for you. Collecting your debts should be as easy as A, B, C (D, E, F)! Here’s what you should do:

A – Affirm Your Foundation, & Act In Small Ways First!

The first step to successful debt collection should, ideally, start way before you even send your first invoice. You need to make sure that you have an airtight process of requesting and collecting payments for your goods/services; especially if you have multiple clients who are consistently behind on paying you, you might be surprised to find that the fault is actually with your system, not with your clients (or at least, not entirely).

Before starting any debt collection efforts, start there! Look for ways to streamline your process. Is it easy for clients to pay you? Get better software and find other ways to utilize technology. Consider implementing automatic payments. Send more reminders and set up a system of calling clients, rather than just emailing them, if that would be more effective. Make sure you are sending the invoices to their accountant or accounting department, and not just any contact. If you’re not already working with an accountant you trust, who has experience in these matters and can handle the follow up for you, that’s step 1! Do you have a clear payment policy, in writing, that your clients have seen, that outlines the terms and the consequences of non-payment?

The foundation you have will set the tone for the efforts you can take later if the issue persists. Take the time to review and improve your foundation!

B – Be Aware Of Your Rights & Options

You do have rights when it comes to debt collection; they may vary depending on your industry/the type of debt/where you are located. Our debt collection lawyers are located in Vancouver, British Columbia. Here, you do have the right to sue for non-payment, though you may wish that to be the last resort.

You have other options and rights as well. Deciding what to do may be challenging, but knowledge is power, and the more you know about the pros and cons of each option, the more confident you will be in your chosen course of action. You can do research online or schedule a free consultation with Lam Legal to learn more about what rights and options you have depending on your specific circumstances.

C – Communicate, But Stay Compliant!

You have rights, but you do not have free reign to harass clients who have unpaid invoices or use any debt collection methods; there are limitations on how you can act and communicate, laid out in the Business Practices and Consumer Protection Act. 

For example, you cannot communicate with a debtor, a member of their family or household, or their friends and acquaintances, or their employer using threatening, profane language, or while exerting excessive pressure. You cannot call them in the middle of the night, or outside of afternoon hours on a Sunday, or at a frequency which could be seen as harassment. You have to give them notice before taking certain actions. If you don’t comply with the laws regarding debt collection, you can be counter-sued or reported to the authorities, who may penalize your business. A lawyer can advise you as to which practices are outside the scope of the law and ensure you remain compliant throughout the process!

D – Do Your Due Diligence & Document Everything!

As soon as you realize that you have unpaid invoices, even if it has only been a few days past due, begin to keep track of what is happening. Gathering documentation can only help your case in the future if you need to take more aggressive action; without evidence, it could turn into a “your word against theirs” situation. Write down the times and dates of any phone calls made, as well as a summary of what was said. Move any email communications about the unpaid invoice to a certain folder. Stay organized!

E – Explore Alternatives To Litigation

You don’t have to jump straight into a lawsuit, and you likely shouldn’t! Suing someone for a debt is an expensive undertaking. Sometimes it is worth the time and effort, but you have to retain legal counsel to represent you, undergo depositions, and prepare for a courtroom conflict. There are other alternatives you could try first, and leave litigation as a last resort.

You can file your dispute on the Business Disputes Register for a small fee of $38, and your debt collection matter becomes a matter of public record. Your client will receive a notification and be urged to contact you to negotiate its removal. The idea is that hopefully, because the Register/dispute appears on search engines and may have a negative effect on their reputation, they will be compelled to respond and pay the invoice so they can be removed. 

You can attempt mediation, but your client must voluntarily undertake this process, and they are not bound by the result (it is facilitated by a neutral third party who works to reach a mutually agreeable solution). You could also attempt arbitration, which is similarly voluntary but does lead to a binding result; arbitration is more complex and expensive than mediation but less so than going to court. These services are offered by private practice arbitrators who may be members of the ADR Institute of British Columbia or ADR Institute of Canada. 

If none of those methods work, you can either work with a debt collection agency or a debt collection lawyer to get results.

F – Find A Law Firm To Help You!

Hiring legal representation offers several advantages; collection agencies can only take so many steps to collect a debt before they are limited by their non-lawyer status. They don’t have certain legal remedies available to them, and can’t file lawsuits or pursue garnishment, liens, etc. Even if you decide not to file a lawsuit, having the option to give you more leverage. A collection agency can’t give you legal advice that will result in you making educated decisions. Lawyers are also held to a higher standard by the Canadian Bar Association, so you can place more trust in them than a debt collection agency operating alone.

Need Help? Call Lam Legal – Trial Lawyers

In British Columbia, you only have two years to pursue a debt – this is known as a “liability limitation period”. It begins when you know, or ought to have known, that a debt was not going to be paid. It’s imperative that you act quickly and wisely if you want to recover the money you are owed! Our experienced Vancouver, BC debt collection lawyers at Lam Legal can explain your rights, options, and next steps during your free consultation. Call now to talk with us about your unpaid invoice problem!