Non-Payment

[KristineS]

This is a topic that comes up a lot on one of the other forums I frequent.

For those of you running your own businesses, how do you handle it when someone doesn't pay you? Have you ever had to take anyone to court to get payment?

[orion_joel]

I have never had to go as far as court, most of the payments i have had trouble getting it would not be worth my time.

The pretty standard way i go is mail or email invoice within 2 or 3 days of providing service or delivery of goods. The terms i offer are usually 7 to 14 days. If the account is not paid within 28 days i will resend the account with a letter informing of a late account. I know 28 days is more then i had originally given, however there are a lot of companies i know who batch pay their suppliers at months end, so i like to give them this chance even if it does go outside the original terms.

In all but one case i have received payment within days of the second letter informing them of an overdue account. I do put a stop on the account if they go outside the terms of the account. If they don't pay at this time i continue with 2 more letters at 14 day intervals, followed by a call at 60 days. At this time i would evaluate if the account is worth spending more time trying to collect or not. If the invoice is for a one off to a client, for services less then $100, then with the time i have already spent trying to collect it, it may not be worth trying any other avenue.

For anything over $100, or for a product sale where i have had to outlay money, over avenues will be taken, such as small claims or court, where appropriate, thank-fully i have never had to take it this far.

[cbscreative]

This is rare for me, and I've never gone to court. My solution will not work for every business, but anyone doing design work is also protected by copyright law. I use this as leverage because the client doesn't truly own anything until they pay for it. If they were to use anything I created, then it falls under copyright infringement rather than an unpaid bill. I've not had much trouble with non-payment.

[pete]

I'll raise my hand and say "been there, done that." Many times, actually. Had customers go bankrupt, lost it all. Gotten judgments, but they still don't have anything to attach. And some eventually pay.

I've also sent "collectors". I have a friend with a lot of policemen buddies. He'll go make a personal collection call for me and just happen to have 3 or 4 police cars pull up out front while he is there. They just sit in the car, but it works. Had one guy dig into his boot and pull out the cash.

It depends on who you are dealing with. In my case it was auto repair shops, tow truck guys, etc. I had to talk their language.

It used to be in VA that a bounced check over something like $ 50 was a felony. My wife made a lot of trips to court then. Seems like when in front of the judge and he says "Pay or stay" they manage to come up with the money.

By the time they are over 90 days past due, they are no longer your friends, you are better off without them, so do what you have to do.

Don't be like the tow truck company owner I put in a computer system for. He had a car dealer who owed him $ 10,000+, over 120 days old and kept towing for him "because he was such a good customer."

It's your money, do what you have to do to get it.
.

[Evan]

I usually find following up by phone can resolve the issue unless I totally expect a dead beat. In that case, sending it to collections after 3 months has works quite well.

[Paul Elliott]

I no longer have problems with collections or bad debts.

I usually structure it like this:

1/3 in cash when we sign the agreemet.
1/3 before I release the first half of the project and
1/3 before I release the final element of the project
If they give me a check, I wait for it to clear before I proceed with any aspect of the project.

Of course, not all projects are amenable to this approach, but I find most are if one constructs them that way.

Paul

[Blessed]

I normally just have problems with slow pays... I have a few customers who used to be notorious for this then I started giving them watermarked, low res proofs and "forgetting" to release the high res final files until they remember to send payment - it works. When I get into a big project I bill weekly. That helps too!

[KristineS]

I normally just have problems with slow pays... I have a few customers who used to be notorious for this then I started giving them watermarked, low res proofs and "forgetting" to release the high res final files until they remember to send payment - it works. When I get into a big project I bill weekly. That helps too!

That's pretty smart Blessed, hold the finalized work hostage until you get paid. I bet those payments come in a lot faster.

[Blessed]

Yes they do - I've also found that by billing big jobs weekly I alleviate the "sticker shock" aspect and get paid without as much hassle and faster.

[Paul Elliott]

I normally just have problems with slow pays... I have a few customers who used to be notorious for this then I started giving them watermarked, low res proofs and "forgetting" to release the high res final files until they remember to send payment - it works. When I get into a big project I bill weekly. That helps too!

Blessed, make that part of your agreement. They get the high-res material AFTER their check clears. When you make that your policy up front it forces your customers to value your work more highly. If they think you can be manipulated and possibly cheated, they may just try to do that.

Paul

[Blessed]

Blessed, make that part of your agreement. They get the high-res material AFTER their check clears. When you make that your policy up front it forces your customers to value your work more highly. If they think you can be manipulated and possibly cheated, they may just try to do that.

Paul

I've found that with the people I'm dealing with in the local market that I loose work if I present it as part of the initial agreement, our initial agreements consist of the customer saying "this is what I want" and me saying "I'll have something for you to look at in a day or two" however I say, in writing, when I send them their first proofs that the high res/non watermarked final files will be delivered upon receipt of payment everyone is fine with that. This is going to change as I branch out of strictly print work and into web work.

I'm not exactly sure why that is the case, but it is and I've learned to deal with it and have pretty much eliminated my slow paying customers. Now the only consistently slow payer I have is a printing company I do large projects and overflow work for... they think they should get net 60 instead of the net 15 terms I state on my invoices. I get enough work from them that I put up with it for now, and they always pay and after 30 days they start hearing from me often... and I don't release any new work I have for them - that usually makes the checks appear because then the sales staff starts yelling at the business office.

[orion_joel]

I don't see why you couldn't continue this sort of trend into web work Blessed. For graphics you can still watermark, and only provide no editable jpg files, when payment received you can release the full quality and editable psd files (or whatever program you are using).

If you go to website same deal maybe only release screen captures of the site, or a dummy site without the full functionality, before payment is received.

I think a good trend to attempt to set is something along these lines for products that it is possible, For goods such as physical products, require payment before hand unless known to be a good payer and proven track record. For Service work it becomes a bit harder, and this is where people really need to take an interest in valuing their work, i know some people that do service calls for different type's of product and require payment upon completing the work.

Especially for one of customers who you may end up billing $100-$200, you don't want to be chasing the money, it takes time and just brings down the value of your time.

[Blessed]

Joel - thanks for the thoughts especially on my transition into web work. I'm still in the learning and research phase of that and appreciate the input.

You also bring up a good point about physical products - On the rare occasion that I broker the printing as well as designing the piece I almost always require the printing costs to be paid up front. In fact I can only think of one client - the Alumni department of a local college - that I don't require payment up front from

[Paul Elliott]

Here is a link from Kim Komando that gives information and suggestions about protecting photos. Using metadata to protect photos online - Tips from The Kim Komando Radio Show & Web site (http://www.komando.com/tips/index.aspx?id=5291)

I know little about such things, but it may be of use to others.

Paul

[Paul Elliott]

I've found that with the people I'm dealing with in the local market that I loose work if I present it as part of the initial agreement, our initial agreements consist of the customer saying "this is what I want" and me saying "I'll have something for you to look at in a day or two" however I say, in writing, when I send them their first proofs that the high res/non watermarked final files will be delivered upon receipt of payment everyone is fine with that. This is going to change as I branch out of strictly print work and into web work.

Remember that you train your clients to do things the way you want them to perform.

Of course, this is not done overnight, but by giving excellent service, building the "affinity bond," and working on "customer relationship management" you can have people coming to you almost begging to become your clients willing to do and pay whatever you ask. Customers ARE trainable and, if you do it properly, they'll LOVE it!

THAT is the sort of WOM advertising (See below.) you want. It can be done skillfully and with precision in all but the tiniest markets; in those it probably isn't necessary.

. . . Unless, of course, you don't believe it's possible.

I can assure you it is possible and surprisingly easy to do when your process and systems are designed and delivered consistently with that goal.


I'm not exactly sure why that is the case, but it is and I've learned to deal with it and have pretty much eliminated my slow paying customers. Now the only consistently slow payer I have is a printing company I do large projects and overflow work for... they think they should get net 60 instead of the net 15 terms I state on my invoices. I get enough work from them that I put up with it for now, and they always pay and after 30 days they start hearing from me often... and I don't release any new work I have for them - that usually makes the checks appear because then the sales staff starts yelling at the business office.

They're simply using you as their banker. If you have that kind of money and enjoy the relationship, open a bank!

When I was in the printing business, we ran into this all the time. Because we did excellent work on time or better without a bunch of whining, our regular customers did NOT want to be discharged from our rolls.

Over delivering to each of your customers is one of the key elements.

Paul

[Blessed]

Paul-

Thanks for the input, I do appreciate it! I'm still in my first year of business for myself here and am learning/changing/adapting as I figure out exactly what I'm doing.

The design part is easy - the business part is what I've had to work on!

[Paul Elliott]

Paul-

Thanks for the input, I do appreciate it! I'm still in my first year of business for myself here and am learning/changing/adapting as I figure out exactly what I'm doing.

Good for you! Keep it up!


The design part is easy - the business part is what I've had to work on!

Welcome to that zone known as "the real world!" People are always the most difficult AND most rewarding part. We must view it not simply as a challenge but part of the reward as is "smelling the roses.". . . not as a confrontation but by joining the others in your area--vendors & customers--as shoulder-to-shoulder teammates. That way you disarm anyone who wants a confrontation. There can be conflict only if 2 people agree to fight.

Don't missunderstand me. I am NOT an appeaser! I'm a guerrilla warrior perfectly prepared to use force . . . when necessary!

In my training, I learned never to risk an asset or display a move unless it was absolutely necessary and the only reasonable way to accomplish my objective.

First, know thyself; then, understand the other person--strengths, weaknesses, needs, and desires--then, you can move shoulder-to-shoulder to help him or her for your mutual benefit. That's where the longterm relationships become the best, strongest, and most beneficial.

Keep up your excellent work!

Paul

[cbscreative]

Well, Blessed, since you're still new to the business end of things, you made a good choice to join us here to learn and grow. When I started my first biz in 1986, it would have been nice to have a resource like this. You should congratulate yourself for doing it at all. Being an artist usually makes being a business person more challenging. It's not that an artist can't learn the skill, it's just not natural for most.

[Rockman]

I had a customer give me the run-around for 3 months. Telling me to meet him here, there, and standing me up.

I was in the HVAC business at the time. I had installed a furnace at his house on an "emergency" basis. He promised to pay me the next day.... 3 months later and 5 missed appointments later... I got a little angry.

I went to his home on the hottest day the year and removed the outdoor breaker from his Central A/C and put a lock on it. I did the same at his business.....

Long story short: I got called every name in the book and got paid the very next day....

[Paul Elliott]

I went to his home on the hottest day the year and removed the outdoor breaker from his Central A/C and put a lock on it. I did the same at his business.....

Long story short: I got called every name in the book and got paid the very next day....

Rockman, that's known as leveraging your assets. Certainly, the 2 A/Cs were still "your" assets since your "non-payor" didn't "own" them yet. :D :cool:

Paul

[KristineS]

That's definitely a unique way to get payment Rockman. Too funny.

[cbscreative]

I agree, that was good for a laugh. If it were a furnace, there might be some legal concerns, but with AC, that was a great way to handle it.

[lav]

Ive had 2 or 3 Ive had to take to court after more than 12 months. There are some people unfortunately who are very good at getting around paying and the ones Ive had to deal with owed others money as well. One really interesting one I had was from a famous TV personality who ordered a $12,000 job from us after 12 months of not paying we took him to court and he still didnt pay even though he had been ordered to by the court (legal system sucks).

I had finally had enough and after doing some research found that he owed other company's hundreds of thousands of dollars. I contacted as many newspapers, current affairs TV programs as I could to tell them how he is ripping people off and to my suprise I was paid in full by the end of the week. It seems he had connections within the media as well and once word got out that I was squealing he must have "paid me off" so it seems.

[Paul Elliott]

It seems he had connections within the media as well and once word got out that I was squealing he must have "paid me off" so it seems.

Great story, Lav! Just another case of leveraging all your assets. :eek: :D

Paul

[Ad-Vice_Man]

Cash in Advance = No Collections Issues.

[Evan]

Long story short: I got called every name in the book and got paid the very next day....

While that was probably a bit extreme, sometimes it may take a drastic measure.

If this guy had a problem with the service he received from you to begin with, he should have let you known.