Advantages and Disadvantages of filing a Lawsuit Against Late Paying Customers You may have some or many customers who repeatedly delay paying you on-time. Many business owners take legal action by filing a lawsuit against customers who pay late or are denied to make any payment towards the invoice. Everything has advantages and disadvantages. Filing a lawsuit for debt recovery is no different. Here are the advantages and disadvantages of filing a lawsuit against late paying customers.
Damage to reputation
● Just by hearing the word lawsuit or court, many businesses would get worried about their brand image in the market.
● No customer would like their reputation to go down in the market. Hence, on hearing the word lawsuit they immediately clear the pending invoice.
Put customers in a state of shock
● No customer wants to be dragged to court for non-payment of dues.
● Receiving a letter of a legal proceeding against them is enough to put them in a state of shock.
● Your invoice may be cleared even before you register a case against them.
You may lose the customer
● If the customer gives you good repeat business but makes payments late, filing a lawsuit or just the thought of it would do more harm than good.
● After filing a lawsuit, the chances of losing the customer to a competitor are high.
● Going to court for a debt recovery is quite time consuming considering the complex nature of the legal system.
● It may be several years before the final verdict is announced.
● Going legal is a really expensive approach for unpaid invoices.
● The legal charges and expenses will depend on the amount that your customer has not paid.
● Considering the high expenses, it may not make any sense to actually go to court.
If you have several unpaid invoices from customers, it is best to take help from a leading debt collection company in India like Kollecto. Ask the best invoice collections company in India , and they will tell you that filing a lawsuit against a customer would be the last resort when everything else fails. A leading B2B debt recovery company like Kollecto prefers a softer approach with customers for debt recovery. This helps businesses to maintain their relationship with customers.