In these difficult and volatile economic times, it may feel like you are not in control of your business. It is important, therefore, to make sure that the things that you can control are working in your favor and that you are taking advantage of the resources and tools that you have at your disposal.
First, make sure that your contracts and related documents are drafted in a manner that allows your business the best opportunity to succeed. In other words, your business relationships should be guided by documents that are consistent, effective and favorable to your interests. For example, the terms of a contract should be clearly defined, setting out your rights upon default by the other party. If you have a customer relationship that is governed by multiple documents, such as an open account agreement and a promissory note, it is imperative that the terms are consistent. In that example, the promissory note is often executed as a way to set out a payment schedule. However, if the promissory note does not provide for interest and attorneys’ fees upon default, then you may forfeit the right to collect them, even if those terms are in the open account agreement.
Another way in which your business can improve its chances for success is to decrease risk. In the credit context, the best way to do this is to be meticulous and cautious when issuing credit. In all ikelihood, your customers need credit just as badly as you need their business, if not worse. Take a close look at the potential customer’s credit and be conservative in the amount of credit to extend. Set credit limits and abide by them. Personal guaranties are essential in this market and your business should be in a position to demand that your customers sign one in order to obtain credit. Personal guaranties should be signed by the principals of the business and their spouses. Spouses are vital because in most instances individuals own all of their personal and real property jointly with their spouse. A judgment against a defaulting guarantor is nice but if you do not have their spouse on the hook, the judgment will be difficult to collect. However, please note that the Fair Debt Collection Act limits your ability to require the guaranty of a spouse. Make sure your salespeople understand what is expected with regard to all of these issues, so that the processes and policies are enforced.
At Vann & Sheridan, we aspire to help our clients make cost effective decisions when it comes to pursuing legal claims. It is important to us and to our clients that we make efficient use of the legal process and that we are efficient and effective in providing legal services especially in today‘s economy. Your lawyer, accountant and financial professionals can help you with these issues and with developing a strategy for dealing with not only the current economic crisis but other obstacles and adversity that your business may face. The key is to be prepared by taking control of those aspects of your business that you do have control over and to set out a plan.