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3 Business Structures & How to Collect Late Payments

There are many factors that a collections agency considers when developing a B2B collection strategy. The responsiveness of the client, the due date of the payment, and the history of the relationship are all important. When unpaid bills come into question, a business’s structure can also affect the potential for payment. In this post, we’ll discuss how collection agencies alter their strategies based on the structure of a business.

1. Proprietorships

73% of American businesses are proprietorships. Proprietorships make business ownership accessible to everyone, with simple formation strategies. These individually owned businesses are also not beholden to any board of directors or other authority. Instead, business owners can make their own decisions about how to operate. For collections agency owners, understanding how to collect from these companies is crucial.

How to collect from Proprietorships

Because proprietors are independent business owners, they are also responsible for all of their business-related payments. In many cases, business owners may pay business expenses through a personal account. So, if you need to collect a debt from a proprietorship, then targeting the owner is key.

Through conducting business, the owner takes on personal financial responsibility for all transactions. So, collections agencies tend to contact the business owner directly to collect these debts.

2. Partnerships

Like proprietorships, partnerships are also privately owned companies. Instead of having one owner, though, partnerships have several owners. Often, these partners also operate the company.

Simple partnerships only have two partners. More complex partnerships can have several partners. In either case, there may be limited partners, who serve as investors without being subject to liability or entitled to decision making.

How to collect from Partnerships

Collecting a delayed payment from a partnership may become difficult, for a few reasons. As previously mentioned, the way that these partnerships are structured is seldom the same. So, collecting debts from a partnership requires close attention to detail. If initial efforts fail, then the collections agency may have to examine the partnership agreement. In doing so, they can determine who is liable for these debts. With more information than the name of the business, a collection agency can easily find an individual to contact.

3. Corporations

Legally speaking, corporations are treated as individual entities. These large businesses are owned by stockholders and investors, who fund business operations to turn a profit. These investors are rarely employees, and are only involved in business operations to benefit financially. Corporations may enter into contracts, and the entity as a whole is responsible for debts.

How to collect from Corporations

Fortunately, making contact with a representative from a corporation is easier than an evasive proprietorship owner. Because no individual is solely responsible for these debts, the payment responsibility falls to those who operate the corporation. For example, a collector would contact the designated accountant, financial department, or another individual responsible for payment.

In repeated failed attempts, our collections agencies have learned to contact upper management. Executives with more influence over budget and spending can appropriately allocate this funding. Through years of experience in commercial collection, we have learned the best methods for this collection process.

Collect Your Late Payments Today

Regardless of the circumstances, all businesses should receive the payment that is due to them. At Empire Credit and Collections, our experienced collectors have successfully obtained payment from many types of businesses. With a keen eye for detail and consistent outreach methods, we can help you to receive the payments owed to your business.