When A/R Is No Longer Considered An Asset & Filing A Lien Is.

On December 30, 2008 by

Everyone knows Accounts Receivables are supposed to be considered assets but are they always?

Company A sells a large item or provides services to Company B.  This item/service that Company B purchased is something that adds value to the existing property or business or maybe it was for resale.  That is a factor we will determine later.

Company B fails to pay for this item/service in the agreed amount of time that was set with Company A. As time takes its course,  Company A continuously calls, faxes, and emails requests for payment, which has fallen on Company B’s deaf ears.  It is only a matter of time before beating this dead horse costs you more in employee time than going to court to recover your losses would cost.  (Thus the “no longer an asset” assumption.)

What options does Company A have to get it’s money or material back? Depending on what state you reside in, or state that you sold your item out of, you have a few options.

Option A– You can keep with the old fashion collection process. Keep making phone calls, sending faxes of the past due invoice, and emailing polite but firm requests for payment.

Option BFile a lien. If you have installed something of value into a home or business, you can file a lien on the homeowners property.  If you fixed something, even if it is not a car, you can file a mechanics lien.  This is time consuming and you must follow an order of operations by state within a time line.  Even then, this action keeps the homeowner from obtaining a loan or selling their house.

Option C- Run to a law office for collection.  Good luck with that.  If you want to recover any resemblance to the original amount due on the original invoice, I would not recommmend this option.

On Dec 30, 2008

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  • Interesting and pithy analysis. I had not considered the collections angle from a more business/non-construction perspective. A good heads up! Thanks