Forums: Discussions for entrepreneurs and small business.

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.

 

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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


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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

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.

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Our Mission is to Serve our Clients with Professionalism and Efficiency.
www.SupportMyOffice.com

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."

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. :-)

You could possibly hand over your uncollected fee to a collection agency, but I think they`ll take 1/3 of whatever they collect, and they`ll also offer a discount to the person not paying.

Better is to maintain a database of non-pays, and make sure you don`t do business with them again. (Maybe a tax advisor might know if you could write off the uncollected debt on your taxes?)

Go down to your local county court house and fill out some paperwork (there is usually only a small fee involved). Basically, file a warrant for him with the charge being "Theft by Conversion".

Instead of being arrested, he`ll be sent a summons from the court house to appear where he must state his side (defend himself) and prove that his intentions weren`t to have you do work without the intentions of paying you.

If found guilty, he`ll be arrested on the spot, and since we`re dealing with $1,000.00, its a felony charge.

I know this seems drastic, but for the small fee to file paperwork, once he gets that summons, he`ll be beating a path down to your doorstep to settle your debt.

This is a great tactic for instilling the `Fear of God` in someone and trust me when I say...it works! And "WHEN" he agrees to pay you, make sure to include the `filing fee` too...it shouldn`t cost you more than $50-$75 bucks to file the paperwork.

In my opinion, it doesn`t matter why he didn`t pay you...fact of the matter is...he didn`t pay up and he should be held accountable.

AND...this is cheaper than getting a lawyer

He`s a tough player?  Show him you`re tough, too.

Send him a demand letter giving him the 10 days to pay that he`s entitled to and send it by certified mail.

Let him know that you intend to pursue legal action if he doesn`t.  And DO it. 

Stick to your guns and others will respect you for it.  If you let HIM get away with it, what`s to keep someone else from pulling the same stunt?

 

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Brilliant advice from Cartess and I agree with him 100%. 

I agree with Cartess ... the filing fees are pretty small for debts under $5K around here.

And if he doesn`t, the state can garnish his wages for you, wheeeee! They have ways of finding people.

He is not in my state.  Does this make a difference?  I am in New Mexico and he is in New Jersey.

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Our Mission is to Serve our Clients with Professionalism and Efficiency.
www.SupportMyOffice.com

I think I found the court form.  Thanks for all your help!

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Our Mission is to Serve our Clients with Professionalism and Efficiency.
www.SupportMyOffice.com