WE'VE MOVED!

We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

When they don’t pay...

jenidlgjenidlg subscriber Posts: 2
I have recently found myself in a situation in my business where a client I did some work for in May has decided not to pay me.  I am wondering, does anyone know an effective method of collections in a situation like this?  This guy is a tough player and is withholding payment out of spite.  I feel he will not pay unless I force him to.
 

Comments

  • glgcpaglgcpa subscriber Posts: 0 Member
    It`s a horrible fact of doing business that some people will just not pay you.  The reason why they have choosen to not pay you will help you out more than trying to get them paid.The sad reality is that many people now a days feel that they deserve to get something for nothing.  How people can live with themself after they do this is beyond me.  I mean how many people go to the grocery store and fill up their cart and then when they get to the cashier they just say they don`t want to pay and they walk away?  Obviously, if they did that they would be arrested for shoplifting.The short of it is this person stole from you.  Obviously that`s not the type of person you want as a client, so no matter what you do, I hope you no longer do work for this person.Like I said before, try to find out why they did this...  Are they just having a temporary cash flow problem?  Did they ever intend to pay you?  Were they unhappy with your service?If they happened to be unhappy with your service and that is why they didn`t pay you, that will help you tremendously.  If that`s not the case, then you can consider other options, such as taking them to small claim`s court.Please let me know how this turns out.Best wishes,Gina
  • jenidlgjenidlg subscriber Posts: 2
    Actually, last Friday I found out this person is quite unethical.  I decided that I no longer wished to do business with him.  He felt shafted because I did it so suddenly.  Unfortunately, payment was due the following week and I wasn`t willing to keep working with him to avoid rocking the boat.  Now I`m stuck.  He owes me just over $1,000.  I really don`t know what to do. 
    Thanks for the input.
  • InactiveMemberInactiveMember subscriber Posts: 12
    Brilliant advice from Cartess and I agree with him 100%. 
  • jenidlgjenidlg subscriber Posts: 2
    He is not in my state.  Does this make a difference?  I am in New Mexico and he is in New Jersey.
  • jenidlgjenidlg subscriber Posts: 2
    I think I found the court form.  Thanks for all your help!
  • bertbert subscriber Posts: 12
    I think I would exhaust all things outlined in this thread before I would turn to the courts.   But that is my worthless opinion.  The courts are mess up and should be your last recourse.  But if you threaten to go to a lawyer or to court you must do so if all else fails.  There is nothing wrong with getting the advice of a lawyer this time and you will know what to do in the future.  Getting good legal advice is more than likely better than taking our advice on an issue like this one.  I will bet if you go to a lawyer he will start by you trying certified letters from you first.  But at least he will give you all the right words to use...
  • glgcpaglgcpa subscriber Posts: 0 Member
    We had some information awhile back on the percentage of customers who
    don`t pay. I think it may have been during a discussion of home
    staging. At that time, various people with statistical knowledge
    indicated that somewhere in range of 3% of accounts receivable going
    uncollected would be "normal." I don`t recall reading that discussion, so I can only comment on your post here and have to say that sure you can call "3% of accounts receivable going uncollected" as "normal", but I certainly wouldn`t stretch that to mean that "normal" is average or typical in a specific industry.  For example, many of my physician clients see up to 40% no-pay.  The "average" for them is 20%.  Then again for a plastic surgeon or some other "cash up front" physician the 3% is probably "normal".Thus my point is that even if 3% is normal among all industries and professions, you may actually see higher or lower in your specific industry or profession.


    That means you build into your costs of doing business this percentage
    where you won`t get paid. The trick is that if you sell things for $10,
    and other things for $10,000, you want to make sure your 3% is mostly
    at the low end. This is, in my opinion, excellent general advice, taking into account what I stated above - don`t use 3% if 3% is not right for your industry or profession.


    (Maybe a tax advisor might know if you
    could write off the uncollected debt on your taxes?)

    If you are on the accrual basis of accounting for tax purposes then you can write off your uncollectable debts on your tax return.  If you are on the cash basis of accounting then you never paid on tax the income you didn`t receive so there is no write-off.glgcpa2007-6-8 12:45:56
  • glgcpaglgcpa subscriber Posts: 0 Member

    As for the tax thing, if a product is shipped and gone, can`t you at
    least write off the cost to you of purchasing or manufacturing that
    product?

    Most certainly!
  • NuevolutionNuevolution subscriber Posts: 30 Bronze Level Member
    I have recently found myself in a situation in my
    business where a client I did some work for in May has decided not to
    pay me.  I am wondering, does anyone know an effective method of
    collections in a situation like this?  This guy is a tough player
    and is withholding payment out of spite.  I feel he will not pay
    unless I force him to.
     
    jenidlg,
    I know what you are talking about... I think what you need to do is
    toughen up your policies.. I think it`s time for you to start amending
    all your contracts if you have any, if you don`t... This is the time
    where you goto legalforms.com and find yourself a contract that fits
    your type of work modify it or have a lawyer modify it for you.
    What I did was, joined pre-paid legal services, had lawyers modify all
    my contracts and when someone doesn`t pay, you have an actual lawyer
    calling the person.
    See the problem with sending him to court is that, even if you summons
    him, he can re-schedule, and reschedule, and reschedule. By the time it
    goes to trial you would probably not even care about the money anymore.
    "A waste of time"..
    It takes 30 days for the summons to be handed to him (it doesn`t happen
    tomorrow) then another 30 to 90 days for your hearing.. if he
    reschedules, they usually do it 90 day intervals. So if he reschedules
    3 times thats 9 months form now that you would be going to court.
    Although, that would shake his cage a little, I don`t think that,
    that`s your solution. Another thing you might want to do is send him to
    collections. DUNN & BRADSTREET has a good program where they write
    the letter for you and they do the calling.. if he doesn`t pay... Well
    then there goes his business credit..
    Was this for a service or product?
    Nuevolution2007-6-8 22:58:47
  • jenidlgjenidlg subscriber Posts: 2
    I agree!  Court is not a valid option for me at this time.  Not because I need the money but I have better things to do with my time like replacing him as a client.  What I have done is reviewed my time sheet, which he was questioning.  I found that I had made a few mistakes, unfortunately for him, they were in my favor. 
    This gave me the information I needed to pursue him myself with the proof that he cannot question my timesheet and payment is expected by XYZ date or collections will proceed.  I have already obtained the services of a Collections Agency and they are chomping at the bit should he not respong to my curteous request that he pay up. 
    I have already begun drafting proper contracts that will protect me which was the mistake I made with the previous client.  I allowed him to use his contract.  There was nothing in it to protect me.  That will not happen again. 
    This has been a tremendous learning experience for me and I value the advice and support that I have recieved from the individuals here at Start Up Nation.  I look forward to growing my business with your help!!!
    PS  I am a Virtual Assistant providing Administrative Services remotely across the US and Canada.
     
  • NuevolutionNuevolution subscriber Posts: 30 Bronze Level Member
    hi jenidlg,
    I don`t know how the laws would work since he`s in another state,
    and it could even be harder if you didn`t have an agreement drawn up,
    especially since he`s not local.
    Try some of the other advice mentioned by others. I don`t know what
    industry you`re in, but here is a site that offers legal document forms
    in a template type format where you (or your attorney) could modify
    specific to your needs:
    http://www.weblawresources.com/
    Also...if he were local...this particular charge wouldn`t be dragged
    out for 90 day..., let alone 9 months. If he dragged this thing out
    that long on his own, then he`s probably very familiar with the
    `system`. But the average guy (and thats most of us), don`t know much
    about the legal system to drag stuff out this long without the
    assistance of an attorney (and that costs money).
    if he were able to get all these types of extensions, he`d most
    likely need a lawyer, where he`d then be out of pocket (probably a lot
    more than what he owes you). But...since he`s out of state, I couldn`t
    tell you.
    Consult with a lawyer in that case...but for scumbags who try and pull this stuff on you locally...this would be perfect
    Cartess,
    I am pretty sure, that the minute he gets served, he would consult a
    lawyer, most lawyers advise would be to drag it to the full extend of
    limitations (which is about one year)...
    See she is facing a tough situatuion since he`s in NJ and she is in TX.
    She would have to Fly out to NJ and do the filing out there... Not in her state...
    Now they owe her 1,000.00 a ticket to NJ is about 300.00, on
    SouthWest.. I know because I`m originally from Linden New Jersey.. then
    she would have to go to the township that he is doing business in and
    file the summons...
    To travel back and forth? It`s not worth the money and the time.

    I think what she heeds to do is, Trash his business Credit.
Sign In or Register to comment.