Holding a Shipment For Non Payment Is Risky Business

Regardless of location, shipping companies experience some of the same problems as non-payment on an invoice. You might become tempted to hold their shipment for nonpayment.  but other alternatives result in a better outcome.

Legally, you could hold the shipment, but that comes with ramifications. The client may use your firm repeatedly and could stop using you. While they may owe on the current shipment, you should first review their record to see if they have paid late before. If they have typically paid in a timely manner, reaching out via telephone or email makes the smartest choice. Simply ask why they have not yet paid the invoice. Often, the client simply has a cash flow issue that is temporary.

Other times, you have an odd situation where the customer refuses to pay despite a written agreement to do so. They may not provide a reason. If you have an existing contract with them, this can seem odd. You may be tempted to hold the next shipment you receive, but that violates the law.

Of course, you cannot ignore when a shipment goes unpaid. Doing so would cause you to experience your own cash flow issues since you would have no incoming cash to paid overhead or payroll. Non-collection of invoices hampers your business growth, but you can re-establish your path to solvency.

Under the tenets of the common law, the shipper has an “automatic lien against goods” when the invoice for them goes unpaid. You can retain the goods until the client pays for them, but this costs you more money since you pay for the storage space, proper storage, such as cooling or refrigeration, etc. After a specific period of time which the law details, you have the right to throw out the items or sell them, as long as that was established in the contract. This contract applies only to the current shipment. Each shipment has its own contract, so while you can refuse to release a shipment that has gone unpaid, you cannot refuse to release a future shipment because the previous shipment went unpaid unless the contract the customer signed includes a clause stating this is permissible. 

It is vital that you establish business procedures and processes regarding invoice payment and how to collect past due debt. This sets a prescribed amount of time so that you can collect for each invoice without overspending on resources, person-hours, and effort.

While some firms use a payment due on delivery mechanism, others use a net-30, net-60, or net-90 days payment mechanism. That refers to the number of days allowed for payment – 30, 60, or 90. Under most circumstances, a shipping customer would contact the freight shipper to apprise them of a problem with payment and to make arrangements.

Rather than exhausting your own resources attempting to collect, contract with a third-party collection agency. This provides the best solution for collecting unpaid debt since it allows your employees to do their jobs without needing to attempt to collect any type of debt which probably does not fall into their job descriptions. Besides freeing your employees to do their actual jobs, a collection agency provides the most effective way of obtaining the money owed.

Collection agencies specialize in either consumer or commercial debt collection. The two are vastly different. Commercial debt is less structured and the law provides specific guidelines about the methods available to collect the debt. A third-party collection firm knows these laws and remains within their confines so that the debt gets paid, but the laws get followed, too.

Since these agencies have attorneys on staff, you do not typically need to hire one unless the collections process goes to court. All of the collections professionals receive training and education inappropriate contact methods and are primed on key legal issues. Their critical interventions provide an effective method of collecting payments for unpaid shipments.

You do need to get your shipping and freight invoices paid, but not at the expense of your current customer, your overhead, legal liability, or your employees being able to do their job all day. Your customers may just need a nudge to pay on time. A collection agency can help with that, but you need one that specializes in commercial debt and freight.