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Learn this to increase your chance of winning your case!

Posted on April 15, 2019 by Michael Lebovic

This week we will go back to defining legal terms

Today: Pleadings

FIrst things first- naming the defendant(s)

We will cover what pleadings are and what needs to be in them for you to increase your chances of winning your case.

Before we get to pleadings which are the written documents you supply the court with which lays out your story, make sure you have named the defendants by their proper legal names. That applies regardless of whether you are suing an individual or a company.

If you file papers with an incomplete name, or you sue a trade name, or you name the company incorrectly, the process will not get you the desired result.

The same holds true if you are suing an individual. Be extremely careful that you have spelled both the first and last names correctly. Does this defendant have a middle initial that would distinguish him from others with the same name? Better put that down.

I know of folks who have gone to the tremendous expense and effort to get a judgment that was essentially useless when it came to getting the judgment enforced because they had not named the party correctly.

PLEADINGS

Pleadings are what you write to convince a judge of the righteousness of your claim.

It explains the cause of your claim. Why this defendant should be liable. Why and how he or she caused the damage that you are now looking for restitution for. You need to explain what happened, where it happened and how.

You then need to lay out exactly how you came to the dollar amount you are claiming for.

The more documentation you have to back up your numbers and story the more likely you are

to get what you are asking for.

Writing good pleadings is very much an art form. It can be done simply or it can be done in a very lengthy, convoluted and meandering manner that will often leave a judge scratching his head or worse, frustrated.


Save money and avoid aggravation by following these tips

Posted on April 09, 2019 by Michael Lebovic

Not being on top of your case and asking the right questions can cost you money and cause you significant aggravation. I would like to show you how to avoid that kind of pain.

Someone came into my office this week seeking advice and help to collect from a debtor that owed a balance for quite a long time. It turns out that she had retained a lawyer to file a claim against this debtor over two years ago.

She was waiting for certain steps to be taken on her behalf and assumed, without checking, that things were going along as they should. This turned out not be the case. The steps were not taken, the necessary forms were not filed and the date for a court appearance was not obtained.

The unfortunate part of this story is that this individual waited for over a year before attempting to contact her lawyer. When a phone call was finally made there was no reply. Nor was there a response to emails sent.

Needless to say, remedial action will have to be taken, after first looking into what has and has not been done so far. This will take time and money, while further diminishing this plaintiff’s prospects of recovery of the funds by the loss of time.

All of this could have been prevented by better and more frequent communication.

When you hire a lawyer or paralegal, they are there to serve your best interests. One of the ways they do that is by keeping you informed. Because of how busy legal practitioners are this will sometimes not happen in a timely manner, but most lawyers and paralegals, involved in a collection, small claims court or other matter will ensure they keep you informed of what is happening with your file.

Often something that needs to be done within the court process does indeed take a lot longer than we all would like it to. In that situation, there is nothing to do but wait. frustrating as that may be.

But…unless you have specifically been told that action has been taken already and that “now we wait” you should not allow much time to go by before contacting your lawyer or paralegal.

Something being missed, forgotten or misplaced can always happen. As the client, you have the greatest stake in the matter and your role is to make sure that:

1. You have given your representative all the information you have so best represent you without holding back any relevant information.

2. That you know and understand what is happening and what is being done on your behalf.

Some steps you can take to protect yourself and help your representative.

First of all, don’t be shy and make sure you communicate regularly with your representative.

You are paying for your lawyer/paralegal’s time so be sure to prepare before you call.

Prepare a list of the questions you want to ask.

The matter you are dealing with probably has a significant emotional component, which will make you want to vent and express your frustration at length. Don’t. Remember this is costing you money and going over familiar territory will not help. Save your rant and venting for someone who is not charging you by the hour.

Keep a pad and pen handy so you can jot down what you are being told.

Keep your questions succinct and to the point.

It is OK, to ask when you can expect to hear further about this, Note that on your calendar.

Follow up if you do not hear back.

If something new develops let your representative know as soon as possible.

Generally, I find most of us get over-excited when dealing with legal matters that involve us. I therefore strongly urge my clients to do all the above in a short email. This helps keep them focused and limits the information to what is really important. It has the added benefit of giving everyone a record of what was said.

Last but not least, do not forget to review your email carefully before you hit “send”.


Four things that will help reduce your write-offs

Posted on March 26, 2019 by Michael Lebovic

I want to share a few tips with you that will help eliminate disagreements with your customers/clients and get you paid faster.

You will have much fewer write-offs and greatly reduce the need to use services like mine to help in the collection of bad debts you may have.

The truth is we all know how to do this but we are busy with a million different details that take up our energy and time every day,

The net result is that we are constantly looking for short cuts and taking the path of least resistance. After all, who doesn’t want to save time?

And yet these short cuts which seem so right and convenient at the time can come back to hurts us when a hiccup occurs

4 things worth taking the time to do.

1. Give your prospect a written quote so there are no misunderstandings.

2. Draft an agreement even if it is a short one to cover important things like:

The scope of work to be done or services to be rendered.

Is there a timeline for the work or a deadline for delivery?

What if there are extras requested beyond the scope of the original request?

When and how are you supposed to be paid?

What happens if there is a cancellation?

3. Stay on top of your accounts receivable and send them statements/reminders at the 60 and 75-day mark that the account is past due and that after 90 days delinquent accounts are assigned to a third party if no payment has been made.

4. Take action if you have not received at least a partial payment 90 days after your invoice was due. Waiting too long is almost always a bad idea that results in a loss.

Remember- if they are not paying you they are probably not paying other creditors as well. You do not want to be the last in line.


When debt collection meets the judicial system: terms that you should know

Posted on February 08, 2019 by Michael Lebovic

Superior Court

This court handles civil matters above $25,000.00. It also deals with injunctions, construction liens and criminal matters . It has Family Courts that obliviously deal with family issues and criminal matters over $5000.00

Court of Appeal for Ontario

This is where cases wind up when a litigant is not satisfied with a judgment from the Superior Court and strongly feel a mistake has been made. It is not enough to believe that the judge has not been fair or that the judge believed the “wrong” party over the other. Being unsatisfied with a judgment rendered is not enough give it standing in front of the Court of Appeals. The appellant (person filing the appeal) has to show that the judge made an error in law or that evidence that was not allowed in should been entered.

The judges on The Appeal Court make their decision based on the entire court transcript of the trial that is submitted with your lawyers arguments on specifically what error the judge made.

Since the Supreme Court of Canada generally deals with very few cases per year it means that over 90% of the time this court is usually pretty much the last stop for a litigant unless the case is dealing with a very unusual matter or legal issue

Deputy- Judge

A deputy Judge usually sits on the Small Claims Court bench, and makes decisions on cases of $25,000.00 or less. They are generally practicing lawyers who sit as judges several times a month.


Statue of limitations: When hesitation thwarts debt collection

Posted on February 01, 2019 by Michael Lebovic

Statute of Limitations

I bet it sounds familiar. You may have heard this term used on a television show or read it in a news story. Usually it will refer to how long after a criminal act can someone be prosecuted. A Statute is a law (usually) passed by State or Provincial legislature setting a time limit on how long after an act was committed can legal action still be taken.

Very interesting but what does this have to do with what we have been talking about : debt collection, account receivables or collecting on an outstanding loan? I mean….

If I am owed money I have a right to sue on it and collect it and anytime I like right ?

Alas no, this is wrong.

I never cease to be amazed at how many folks in business and even in the professions are unaware of the Statute Of Limitations or, for reasons that continue to mystify me, simply ignore it.

I was recently contacted by a company that is owed $US 50,000.00 since 2015 and they had done nothing to collect except to keep sending email requests and statements. I see this all the time

You do not have forever to collect on monies owed you. So if you are being nice and patient with your debtor it is very commendable. Just be aware that if you wait too long you may lose the chance to collect forever.

The Statute of Limitations used to be 6 years. That was reduced in Ontario and in most of Canada’s other provinces to two years.

This two year period will start running from the time you knew or should have known that you were owed money or knew you suffered damages. Depending on individual circumstances there are different ways of calculating this period but once it is passed, pleading the Statute of Limitations is an absolute defence and you are then barred from collecting what is owed to you, regardless of how just your claim is.

The way to “reset the clock”

One sure way to extend the limitation period, is to get a promise of payment from the debtor in writing. In the alternative, get a partial payment on account, this will keep your claim options alive. But be aware that it will do little to increase the probability that you will get paid. The only way to do that is to act as soon as you know your client’s or customer’s account is delinquent.



Going to court? Learn these terms first:

Posted on February 01, 2019 by Michael Lebovic

Some debt collection cases may end up in court. Winning a case in court requires comprehensive understanding and compliance with relevant laws and regulations.

As our client, you’ll benefit from working with top rated professionals who represent clients in court for over 30 years – and achieve an impressively high success rate.

Here are some relevant terms for this stage:

Service

We are not talking about getting your dinner order served quickly here. In the context of debt collection and court action, whether it is Small Claims Court or Superior Court, unlike on television and in the movies, there are no ambushes or surprises allowed. At least not when it comes to the documents and paperwork you file with the court.

When you file a court claim ( sue someone), you have to let the other side know as soon as possible. This is done by giving them a copy of everything you have filed with the court. In the legal language this is called service. You are obligated to serve every person ( in this context a company is also considered a “person” ) that is named as a defendant.

The manner in which they are required to be served is specifically prescribed by the rules of the court. How you serve a company and how you serve an individual have different rules and may differ from jurisdiction to jurisdiction. Once you have given the other side a copy of your claim they are considered to have “been served” and the clock starts ticking on the time they have to file a defense to your plaintiff’s claim if they wish to do so.

Affidavit

A sworn declaration made in writing, filed with the court attesting to certain facts as sworn by the person making the declaration. It is used to give evidence in a court case where giving live evidence is either not possible, appropriate, or necessary.

Affidavit of Service

An affidavit providing the details of the service of a specific document on a named party, laying out the place, date and time this was done. Usually sworn by a process server who has been hired by the serving party.

Without the filing of this document the case will not move forward. In many jurisdictions the court sets a time limit from the time a court claim is initiated to when it must be served by. In Ontario for instance, you are given 6 months after which you will be notified by mail that your claim will shortly be dismissed.


Planning to sue? Here are some helpful terms:

Posted on February 01, 2019 by Michael Lebovic

Small Claims Court

Every province in Canada and state in the United States has a court like this set up for ..as the name implies, small claims of money. It is also a court where the rules are simplified so that the parties involved can represent themselves if they want to.

It is also known as a court of equity, meaning the main function of the judge is to look at doing what is fair in the eyes of the law even if not everything was done procedurally correct. Each side must bring evidence to support either their claim or defence but parties are given a fair bit of latitude when they haven’t followed all the rules of evidence or form of the court.

How much money can I claim for?

In Ontario, initially the limit was set at $500.00 but over the years it was raised to $3000.00, then $10,000.00 and now it is set at $25,000.00 . You can make claim for more than that but you would have to give up on the rest of the amount over the $25,000.00.

So if you are owed 30,000.00 and do not want to go through the expense of Superior Court, you can still file in the Small Claims Court and declare that you are “abandoning ” the last 5,000.00

The limits in other jurisdictions vary. In British Columbia for instance it is $35,000.00. while In Alberta, it is now $50,000.00.

Jurisdiction – What does it mean?

Generally it means the power to make a legal decision or judgment on an issue. So as outlined above the Small Claims Court would not have jurisdiction over monetary claims of $45,000.00 or a landlord -tenant dispute.

A provincial Superior Court would have jurisdiction over many types matters but not over a Federal issue such as immigration. There are also criminal courts, tax courts, etc. You get the idea.

But In the area of collections, when we use the term jurisdiction we are referring not only to the court with the right jurisdiction but the right geographical area to file the claim in. ie; the proper jurisdiction.

Generally you must file the claim where the defendant resides or where the action arose – that is – where the event that gave rise to the debt occurred.

File in the wrong area and the court will reject your claim.

What if you are in Alberta and someone in Ontario owes you money? Legally the same rules apply, so why not just file in Alberta? After all, you’re already there. True, but often a court judgment has to be enforced because the defendant does not voluntarily comply with the court order and if you have a judgment from a court in Province or State A and your debtor resides in Province or State B you have a problem. Make sure to discuss this with your legal representative before you begin your court claim. There is nothing more frustrating than suing someone, getting a judgment finally and finding out it is not enforceable where the defendant either resides or has assets.



Planning to file a claim? Learn these terms first

Posted on January 18, 2019 by Michael Lebovic

Plaintiff – The party initiating the legal action in court and looking for redress or more commonly money. Also referred to as the Complainant. This is the person or company doing the accusing.

Someone looking for redress or feels their rights have been violated is referred to a petitioner.

They will start the process by filing or having their legal representative file a court claim and having it served on the other side.

Defendant -The party against which the legal action has been initiated. They have to defend themselves. The term applies to private individuals or companies or institutions, there is no difference. In a criminal case this person would also be referred to as the accused.

A claim can be against one defendant or multiple defendants. Each one would have to file a defence if they want to avoid having a judgment entered against them.

Claim – After paying the court a fee this is the document prepared by the plaintiff that is filed with the court, laying out his or her case against the defendant.

The bare minimum necessary in a claim is :

Name address and Telephone contact for defendant

Exact amount you are seeking.

If it is a business to business claim, describe who the plaintiff is and what it does and do the same for the defendant.

For example: The plaintiff is a transport and shipping company registered in Ontario. The defendant is a manufacturer of furniture registered in Ontario.

Next describe in detail the facts that gave rise to the damages unpaid bill you are seeking payment for.

Attach whatever evidence you have to substantiate what you have stated and the amount you are claiming. If there is a provision for interest in your agreement you can ask for that too.

Defense – This of course is what the other side, the defendant will have to write up as a response to the claim and file with the court as well as serve a copy on the other side.

If the claim is unjustified state why this is so, and attach whatever documentation and evidence you have to substantiate your position. If you feel the claim is partially justified you have the option of proposing a payment for part of the claim and asking for the rest of it to be dismissed.



Get noticed and get paid – learn how to use a legal notice

Posted on January 18, 2019 by Michael Lebovic

What’s a Legal Demand / Notice?

A Legal Demand is the first contact by a law office with the debtor.

It lets the debtor know that the law firm has been retained (hired) by the

creditor to take action to collect an outstanding debt.

It will typically state the amount due and sometimes, if the debt stems from some

type of damages, briefly describe what the circumstances were that gave rise to the debt.

Other features of the demand letter, are letting them know that interest, legal and court

costs will be added to the balance and lastly, it gives them a deadline, usually 7 days, in which the recipient of the letter is asked to take steps to rectify the situation before legal action is taken.

What does a legal demand / notice do and what are the benefits if any?

In and of itself it has no legal force but it accomplishes a number of things.

First, it lets the other party know that you have legal representation. In a situation where you are being ignored and not getting paid this is an effective way of getting their attention.

Second, it puts them on notice that they better do something “or else” as the expression goes.

Third it injects another party into the situation so that you know longer have to deal with a stressful situation. It also allows for the calming of any tensions that might have built up.

Fourth and perhaps most important, it may get you paid without further legal expense.


Words that are worth a fortune: Learn the language of debt collection

Posted on January 18, 2019 by Michael Lebovic

Terms you might come across when dealing with Collection of Outstanding Debts

To make it a little easier to navigate the world of accounts receivable and debt collection I will, once or twice a month, define terms you will come across during the process of collections or a small claims court action.

Some of these terms will be familiar to some of you, others may have heard them but be unsure of their exact meaning. So simple ones or not I hope to cover them all eventually. Let’s start with fairly common ones:

Creditor: If you are owed money and have not been paid, you are a creditor.

Debtor: If you owe money and have not paid by the time payment was due, you are a debtor.

Collection Agency: Everyone knows this one right? They are the folks that call you and ask you to pay what you owe their client. So anyone you engage to collect what is owed to you is a collection agency, correct?

Well no, actually that is not correct. The person contacting a debtor can be a Collection Agency, or a Law Office (Lawyer or Paralegal) or a third party acting on behalf of the creditor.

So what is the difference?

Collection agencies are companies that are licensed by the government and have to comply with specific rules. In Ontario they would be operating under the Collection Agency Act. Each of the collectors working for them would also have to be licensed individually under the same Act.

What do they do?

They are allowed to contact debtors in writing and on the telephone and make demands for payment as long as they comply with rules under the act . They can also report a debtor to credit reporting agencies like Equifax or Trans Union .

What do they not do?

They are not allowed to file court claims or appear in court on your behalf, or take any other legal steps. Once it reaches that stage they have to assign it to a legal professional.

Law Firms– Lawyers & Paralegals -are licensed and regulated by the Law Society of Ontario. They generally do not make collection calls or send out a lot of letters. But they will send out a demand and take legal action through the courts on your behalf to recover what is owed you.

Firms that are experienced and do a lot of collections work will contact the debtor before taking any court action and make a determined attempt to resolve the matter. They also report judgments to credit reporting agencies like Equifax, and continue working to collect your money after a judgment if it is still necessary.

Third Parties – Creditors will often have someone they know or have a relationship with contact the debtor. This could be a friend, an accountant or maybe just someone who is very experienced in business.

What are they allowed to do?

Nothing. Unless they are a licensed collection agency or a member of the Law Society they are not permitted to take collection action or appear in court on behalf of someone else. Furthermore, it may make matters worse and more difficult when you finally do hire a professional.


Use credit to get paid faster

Posted on January 11, 2019 by Michael Lebovic

When giving credit can help solve an issue with your client

We have all been there; the service has been rendered and the invoice has been sent out. The invoice due date has come and gone and you still have not been paid. Perhaps you have already called and spoken to your customer in the past and gotten a promise that payment was coming out soon.

Soon has not come and neither has the payment. So you contact your customer again and this time, to your surprise, the customer complains about the quality of the service or the delivery date.

You check your records and see that this has never been brought up before, everything was just fine. As far as you are concerned there was nothing wrong with either the product delivered or the service. It looks like a belated excuse not to pay your bill.

At this point some business people will issue a credit or reduction of their invoice just to get it paid and get thiswrapped up.

Clearly this will eat into your profit margin but it might be worth your while so you can get the matter resolved in an amicable fashion without wasting too much time and money.

Issuing a credit: doing it right

The idea of issuing a credit on an already issued invoice is to get the customer to not only pay, but pay quickly and not give you any more headaches. You want the credit to have the desired effect and also protect you from a client who will take your credit and still not pay you!

What your credit should look like

Make sure you show the original amount due, the date when it was due, and the amount of your credit ( say 10% or whatever you agreed on) and then the new total balance.

Last but most important stipulate a deadline by which the balance must be paid, failing which the credit is withdrawn and the amount due will revert to the original balance. This will motivate your customer and also protect you down the road from being stuck with your lower amount should you have to take 3rd party action to get paid.

You should require your customer to pay you within 7 days of getting the credit, make it a win -win settlement.


How to protect yourself from bad debt | Part 3 | Strengthening your position

Posted on January 11, 2019 by Michael Lebovic

Extra steps to really strengthen your position

In addition to the measures that we’ve already discussed in Part 2, you may want to request the following:

Applicant’s personal guaranty(s) with spouses if possible. Many prospects might balk at this but it is your right to ask for it in return for granting credit. This way if the company closes down for any reason you can look to the owners/directors for payment.

I have had many of our clients (accounting firms for instance) put this in their engagement letter or agreement because they often deal with clients that have multiple companies. After awhile the work begins to snowball and often the service provider is directed to bill a company that may not have any assets or that suddenly has wound down leaving many hours of work unpaid for.

Another piece of information I highly recommend requesting is the SIN # and date of birth of the owner/director and authorization to pull personal credit report.

Agreement for you to verify the information on application from external sources (banks, trade references, credit bureaus, etc.)

Last but not least is the signature of the person, his name spelled out underneath (good luck reading most signatures) what position applicant has with company and that he/she is authorized to bind the company/corporation.

What if the prospect refuses to supply the information requested?

Sometimes prospective clients may start complaining about the application or specific parts of the application. If that happens you could rely on the old “This is our company policy for any shipments /service that has not been paid for “

If you are concerned that you might lose the business and you assess the prospect as being credit worthy you might loosen the requirements on such things as a personal credit report or guarantee .

Some might not want to pay interest on past due accounts. You could then change it to ‘ interest will be charged if it has to be turned over to a third party for collections.’

It is also a good idea to get them to initial those clauses you really want enforceable such as their guarantee, agreement to pay collection fees etc.

There is always a middle ground to be found, but remember the more you have on your credit application the easier it will be to collect your money should something go wrong.

What else should I do?

I recommend updating your client’s credit and banking information once a year or certainly every two years. Problems can come from new clients but sometimes even from long standing clients.

Is there a new CEO?

Has their bank changed?

Has the company been sold?

Has the company merged with another company or just changed its name?

Are there associated companies that use your product/services but are not the ones issuing purchase orders?

Another helpful and fairly simple thing to do is to make a copy of your customer‘s check when it comes in and pop it in their file for your records. It may come in very handy in the future.

Do it at least once or twice a year with regular customers.



How to protect yourself from bad debt | Part 2 | Know your client

Posted on January 11, 2019 by Michael Lebovic

Last week we discussed what you should be looking at before granting credit (see last week’s post) and that certain steps need to be taken. This week we answer the question –

What are those steps?

Well for starters you want information. So back to where we started from; have your prospect fill out a credit application. It won’t guarantee you’ll get paid but it will make it much easier for whoever you use to collect your money to do a more effective job.

Think of what a bank asks you for when you open an account or take out a loan. They are selling you money and they want to know all about you. Your prospects may not want to answer that many questions but you should get the basics.

There are many different types of credit applications available commercially. Pick one that suits your company best. Are you dealing solely with businesses or do you service consumers? Perhaps you do both. Whatever you do your credit application at a minimum should have:

Legal Name and address of the prospect

Operating name (if different) Name and address of any parent company

All contact information: I e: phone #’s, e-mail addresses etc.

How long in business

Names of owners/principals/directors/officers

Bank references -Name of Bank, Branch address +copy of void cheque

Three Trade references – with name of person and position at company

Your terms of payment

Applicant’s agreement to payment terms, to interest on past-due amounts

and to pay for any legal and collection costs

Next week…some additional steps to strengthen your position and further lessen your risk


How to protect yourself from bad debt | Part 1

Posted on January 04, 2019 by Michael Lebovic

The dilemma: Just ship it or Cross those T’s and dot those I’s ?

“I’m about to close this guy. Asking him to fill out a Credit Application will just spook him.”

Sound familiar? It’s what I call the Sales Dept. vs Credit Dept standoff.

Your salesman just wants to close that deal, and you want the business. He is ready to sign on the dotted line so why not go ahead, it can’t hurt, right?

Well maybe, maybe not.

In my experience there is often tension between the salesman and his credit department, that is loath to let the product or service go out without being completely sure the customer is credit worthy. So who is right?

The answer probably lies somewhere in the middle. You do not want to be so restrictive that you push away the prospect. On the other hand a sale or a new contract where the invoice will wind up not getting paid is not worth having.

How can I guarantee I won’t get burnt?

There is only one way – make sure you get paid up front or when you deliver your goods or services.

Short of that you will always be taking a risk when you extend credit and there is no 100% safe guaranteed way of extending credit. But there are ways of minimizing the risk to your company by taking certain precautionary steps. These steps will do two things:

1 They will leave you better informed as to who you are dealing with and allow you to better assess the risk you are taking.

2. They will give you a wider range of options and allow you to take more effective measures should your customer /client be unable or unwilling to pay your invoice.

You are in the driver’s seat when it comes to how much risk you take on and what terms and conditions you place on those risks. The trick is to determine what the right balance is for you, because the more onerous the terms and conditions are the more likely you are to lose certain prospects. There is an inverse proportional relationship between tight credit requirements and volume of new customers.

Some businesses will not do business with a prospect unless they feel very secure, and they require a fair bit of information from prospective customers while others are more relaxed about it. Some businesses even require a commitment by the owners or principals of the company they will be providing services for.

What is the right level of credit to be granted and how do I protect my business from getting stung?

The first thing you need to do is determine the level of risk you can afford to take. One consideration is general and one is particular to you. Let’s start with the latter.

Different people have different comfort levels when it comes to taking risks. No one wants to lose money but some folks can roll with the punches and others are risk averse and will lose many a night‘s sleep over the very same issue.

So you as the Owner, or Controller, CEO, COO, etc. either alone or with a board of directors have to decide on how much risk your company is comfortable with.

A good example of this is mortgages. Until very recently, your best option, financially, was an open, variable mortgage. It gave you the lowest rate possible. The numbers were right there for all the world to see, yet many people preferred to pay more for a locked in mortgage so they have the peace of mind of knowing they would not get caught by higher rates when a change came.

The second factor to take into consideration is more tangible. What are you selling and what is it costing you? What do you have to lose?

If you are providing monthly window washing services to various businesses, you may do very well but each invoice is for a relatively small amount and your risk is spread out over a large number of customers and fairly small. In his case you could afford to take some risks

If you are in the jewellery business or sell other high ticket items, you have a much higher built in cost and risk with each sale. You need to be more cautious in this scenario. Naturally there is a wide range in between these two examples.

You might also be primarily investing your time. Perhaps you are a consultant or therapist. How much time are you willing to risk?

Keeping in mind that most customers are honest and the delinquent accounts will – hopefully- only amount to small percentage of your overall sales. So the question is what can you afford to lose?

That does not mean you should ever let a non paying client off the hook (unless it’s your relative perhaps) but it will determine how tight your requirements should be and what steps you may need to take.



Charging interest on your invoices: pros and cons

Posted on January 04, 2019 by Michael Lebovic

Tip #2- Interest on Past Due Accounts: To State or not to State -What’s the point?

Well, the point is to motivate your clients to pay you on time and before other creditors. When you extend credit to a customer you are extending a courtesy. Some might argue you are doing it to get the business. That may be true, but it is also true that you are doing your customer a favor. With that favor come terms; you get to set the terms as the credit grantor.

What should the terms be? They can range from COD to payable on receipt, to 60/90 days. It is completely in your hands but you should be guided by practical considerations such as your industry’s norms and how credit worthy your customer is.

Past due invoices hurt your cash flow and cost you money. You should be compensated for that and let your debtor know in advance that you expect to be by charging interest.

Won‘t that alienate my customer?

Not really. Experienced business people are used to seeing that and understand they need to pay on time.

Should I insist they pay the interest too when they pay late?

Unless you are a large organization most waive the interest as long as the payment is not seriously delinquent. An invoice that is due upon receipt and is paid in 90 days should have some interest payable, but most of my clients will let it go unless it has been turned over to a third party for collection.

Is it legal to charge interest?

It is as long as there was an agreement before hand that you would charge interest on past due accounts. This isusually accomplished by stating it on your invoices, order confirmation, and credit application if you have one.

So as long as I have it on my documents I’m ok?

Yes and no. It will motivate your client but to make it enforceable in court you need to have it stated in very specificlanguage per the Interest Act or a judge will only award you a low court rate of interest.

You must spell out the specific monthly rate you are looking for AND the annual rate.

Eg. 2% per month (24% per annum) will be charged on past due accounts.

Is there a limit on how much interest I can charge?

Yes, anything more than 59% per year is deemed usurious, but judges will often not grant even lower rates if they deem it too high. I usually recommend to my clients that they stick to 2-2.5% per month (24-30% per year)

Just make sure you word it correctly.


Should you offer a discount for early payments?

Posted on January 04, 2019 by Michael Lebovic

Anyone in business will wince when they hear the words “aged receivables” or ” past due invoices”.

We’ve all been there. Clients are always in a rush to get their orders filled or services rendered, but when it comes to paying the invoice…not so much.

Suppliers want their invoices paid in a timely fashion but not at the cost of alienating a client.

The terms of payment usually appear on your credit application (more on that at a later date) and on your invoice and contract, if you have one. Standard terms for credit grantors as we all know is usually 30 days. We also all know that customers rarely pay before then and in most cases will pay well after the 30 days.

The solution?

One of the oldest and most accepted ways of motivating clients to pay sooner than later is by offering a discount on the invoice. Usually, it appears as a term on the invoice – 2%/10 Net 30.

Your customer can get a 2% discount on his bill if they pay in 10 days. Some only offer 1%.

QuickBooks on line offers some guidelines at: https://fitsmallbusiness.com/early-payment-discounts/

They suggest you look at several factors:

Are your competitors offering a discount? If so how much?

What is the standard in the industry?

As they put it –

“If it’s industry standard to offer discounts or your competitors are offering them, then you may be doing yourself a disservice by not offering a discount. You should match your discount to your industry standard or your competitors’ terms, unless you offer some other advantage to customers (e.g. faster shipping or lower base prices).”

Has the client paid on time in the past?

“Your client’s payment history will also come into play. If you have a customer who already pays early, there may be no reason to offer them a discount. On the other hand, if your customer habitually pays late, this may incentivize them to pay early for a change.”

Still Not sure if this is for you?

Here are several good reasons it might be.:

You’ll get paid faster.

You’ll increase your working capital.

And most importantly you will avoid having a bad debt and possible write off. The longer you wait to get paid the higher the possibility you will not get paid at all.

So What’s next?

If you don’t have these numbers yet, review your accounts receivable and generate an aged list. That is, divide them into those clients that are current, those that are 30,60 and 90 days past due.

How many clients are in each category?

If most are current to 30 days you are doing really well.

If most are 30-60 days you are still doing pretty well but you may want to motivate them by offering a discount in the future.

You might want to add 1% or 2% /10 -net 30 to their invoices.

I recommend calling or emailing their accounts payable department and letting them know about this great opportunity for savings your company is offering them.

90 days plus

Generally, any accounts 90 days and over are a problem and need to be dealt with separately with a collection protocol.



Planning To Sue? Learn These Terms First

Posted on November 01, 2018 by admin

Small Claims Court

Every province in Canada and state in the United States has a court like this set up for ..as the name implies, small claims of money. It is also a court where the rules are simplified so that the parties involved can represent themselves if they want to.

It is also known as a court of equity, meaning the main function of the judge is to look at doing what is fair in the eyes of the law even if not everything was done procedurally correct. Each side must bring evidence to support either their claim or defence but parties are given a fair bit of latitude when they haven’t followed all the rules of evidence or form of the court.

How much money can I claim for?

In Ontario, initially the limit was set at $500.00 but over the years it was raised to $3000.00, then $10,000.00 and now it is set at $25,000.00 . You can make claim for more than that but you would have to give up on the rest of the amount over the $25,000.00.

So if you are owed 30,000.00 and do not want to go through the expense of Superior Court, you can still file in the Small Claims Court and declare that you are “abandoning ” the last 5,000.00

The limits in other jurisdictions vary. In British Columbia for instance it is $35,000.00. while In Alberta, it is now $50,000.00.

Jurisdiction – What does it mean?

Generally it means the power to make a legal decision or judgment on an issue. So as outlined above the Small Claims Court would not have jurisdiction over monetary claims of $45,000.00 or a landlord -tenant dispute.

A provincial Superior Court would have jurisdiction over many types matters but not over a Federal issue such as immigration. There are also criminal courts, tax courts, etc. You get the idea.

But In the area of collections, when we use the term jurisdiction we are referring not only to the court with the right jurisdiction but the right geographical area to file the claim in. ie; the proper jurisdiction.

Generally you must file the claim where the defendant resides or where the action arose – that is – where the event that gave rise to the debt occurred.

File in the wrong area and the court will reject your claim.

What if you are in Alberta and someone in Ontario owes you money? Legally the same rules apply, so why not just file in Alberta? After all, you’re already there. True, but often a court judgment has to be enforced because the defendant does not voluntarily comply with the court order and if you have a judgment from a court in Province or State A and your debtor resides in Province or State B you have a problem. Make sure to discuss this with your legal representative before you begin your court claim. There is nothing more frustrating than suing someone, getting a judgment finally and finding out it is not enforceable where the defendant either resides or has assets.


Planning To File a Claim? Learn These Words First

Posted on November 01, 2018 by admin

Plaintiff – The party initiating the legal action in court and looking for redress or more commonly money. Also referred to as the Complainant. This is the person or company doing the accusing.

Someone looking for redress or feels their rights have been violated is referred to a petitioner.

They will start the process by filing or having their legal representative file a court claim and having it served on the other side.

Defendant -The party against which the legal action has been initiated. They have to defend themselves. The term applies to private individuals or companies or institutions, there is no difference. In a criminal case this person would also be referred to as the accused.

A claim can be against one defendant or multiple defendants. Each one would have to file a defence if they want to avoid having a judgment entered against them.

Claim – After paying the court a fee this is the document prepared by the plaintiff that is filed with the court, laying out his or her case against the defendant.

The bare minimum necessary in a claim is :

Name address and Telephone contact for defendant

Exact amount you are seeking.

If it is a business to business claim, describe who the plaintiff is and what it does and do the same for the defendant.

For example: The plaintiff is a transport and shipping company registered in Ontario. The defendant is a manufacturer of furniture registered in Ontario.

Next describe in detail the facts that gave rise to the damages unpaid bill you are seeking payment for.

Attach whatever evidence you have to substantiate what you have stated and the amount you are claiming. If there is a provision for interest in your agreement you can ask for that too.

Defense – This of course is what the other side, the defendant will have to write up as a response to the claim and file with the court as well as serve a copy on the other side.

If the claim is unjustified state why this is so, and attach whatever documentation and evidence you have to substantiate your position. If you feel the claim is partially justified you have the option of proposing a payment for part of the claim and asking for the rest of it to be dismissed.


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