Simple Steps to Improve Collections

It is a fact of life for every business that a certain percentage of your customers will fail to pay you for your goods or services on the terms you and the customer agreed upon. Although ideally the parties will attempt to resolve a payment dispute in a mutually acceptable way that permits the business relationship to survive, in some cases, a lawsuit is required to collect the sums you are owed. Should litigation be necessary, by following a few simple steps you can get a judgment with less time and effort, greatly reducing your litigation expense.

New York law permits a business that is owed money for goods or services it provided, to recover under a legal doctrine called “account stated.” In its simplest terms, an account stated is an agreement between the parties that an account or invoice containing the separate items composing the account, and the balance due to one party, is correct. This agreement may be explicit, where the parties agree that the sums set forth in the account are in fact owed, or it may be implied by the courts, where the circumstances are such that it is clear that the amounts set forth in an invoice or bill are not disputed.

Under New York law, a party who receives a bill or account is obligated to examine the statement and make all necessary objections, and an agreement may be implied where the party receiving a statement of an account keeps it without objecting to it within a reasonable amount of time. This rule derives from the common sense belief that a party receiving a bill containing incorrect charges will promptly dispute such charges, and a party’s failure to do so creates a presumption that they agree with its contents.

An agreement to the contents of an account may also be implied if the debtor makes partial payment, since the partial payment is considered acknowledgment of the validity of the account.

Where an account has been stated, either by an express acknowledgment of the correctness of an invoice or account, or implicitly by a party’s receipt and retention of a bill without objecting to its contents, or by partial payment of the bill, the courts will not hesitate to grant summary judgment on the amount set forth in the account. Moreover, a party on the receiving end of the lawsuit cannot defeat summary judgment simply by alleging a host of previously unstated objections to the goods or services. In non-legal terms, objections to a demand for payment made for the first time after a lawsuit has been started fall into the category of “too little, too late.”

The takeaways:

• Make sure to bill your customers regularly, and to provide detailed bills that itemize the individual goods and services that make up the bill.

• Continue to send unpaid bills or statements of account showing the unpaid balance, and any payments received, at regular intervals.

As a customer, if you receive a bill containing items you dispute, do not sit on the bill; be sure to dispute it quickly and in writing, stating your objection in reasonable detail.