Companies with on-going customer relationships often provide merchandise or services on regular basis. Invoices for services are sent to the customers while service continues. Ideally, each invoice is paid in full, but reality creeps in. Sometimes, customers let balances accrue and make slowly decreasing payments until payments cease. The company is left unpaid and outstanding invoices sit in accounts receivable. When legal collection on these accounts receivable is necessary, the law provides a range of causes of action. The “book account” is a simple and direct method of commercial collection.
A book account is a record of debits, credits and other transactions reflecting the business relationship between a company and its customer. The book account shows the amount owed by the customer at any time. When a customer makes incomplete payments or no payments the book account should show the increasing balance owed by the customer.
When legal action for collection of accounts receivable is necessary, the book account allows a company to make a “prima facie” case that the debt is owed. This means that the book account record is enough to establish a preliminary right to payment. With the right to payment established, a customer-defendant is more likely to pay or settle their outstanding balance.
If the collection on the commercial debt requires a trial, the book account fits neatly into an evidentiary exception making trial much easier. As a general rule, a statement made out-of-court (either written or verbal) offered to prove a fact at trial is inadmissible. These statements are called “hearsay” are not admissible pursuant to New Jersey Rules of Evidence 802. So, the book account would not be admissible to prove that the customer-defendant owed the commercial debt.
The good news for companies collecting accounts receivable is that a book account falls under the “business record exception” to the hearsay rule. New Jersey Rules of Evidence 803(c)(6) allows the written book account into evidence because (after establishing certain foundation) it is a record of regularly conducted activity. Entering the book account into evidence increases the chances of winning at trial. This evidentiary advantage coupled with the establishment of a prima facie case make the book account a straight forward method of collecting a commercial debt.
Since the facts of each case vary, a company seeking to collect on a commercial debt or account receivable should consult an attorney with their specific circumstances. Offit Kurman practices commercial collections law throughout New York and New Jersey assisting companies in avoiding unnecessary and costly delays. The firm’s geographic practice area includes: New York City (Manhattan, New York County, Brooklyn, Kings County, Queens, Queens County, Bronx County, Staten Island, Richmond County) and New Jersey (Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Monmouth County, Hackensack, Bergen County, Paterson, Union County, and statewide). The Firm invites you to visit the “Promises” page for our new way of doing business.