

Ask HN: Advice regarding past due accounts and getting paid? - ericb

My company does hosted load testing on a consulting basis.  Most of my competitors don't demand upfront payment, so we haven't either. My last two clients are proving difficult to collect payment from. This is a huge let-down to me.<p>I'm wondering if anyone has advice on collecting past due accounts (or preventing them)?  I'd like to hear how you approach collection in scenarios like this?  Steps? Timeframes? Lawyers? Rules of thumb? Etc. Thanks!
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jacquesm
Re. past due accounts: Call. Every day. Be very polite, tell them that you
still haven't received payment and that you'd like to know for sure that
payment has been made. Repeat.

This worked flawlessly for me in the past but I did take in to account that I
probably wouldn't be working for those customers ever again (and funny enough,
in most cases I did, and in most cases I used these as reasons to demand up
front payment on future jobs).

The squeaky wheel gets the grease...

~~~
jlees
yup, calling every day was the only way I managed to get past due payment I
was owed in the past. If they hedge (oh it's in our internal systems) ask for
a day to call them back and call back the day before. For my cases it's
usually been someone different handling the finances side of things, and the
customer who I dealt with is actually embarrassed payment hasn't been made.

You could also start charging interest on the overdue bill, but I believe you
have to state this in your invoice. then you have an excuse to call - to
update them on the amount they owe.

I've not heard of anyone at startup level resorting to a collections agency
but I have heard of the small claims court being involved sometimes. Never had
to go that far myself, so I can't really comment.

~~~
eli
I'd go collections before a lawsuit, for sure.

Most collections agencies cost you little or nothing up front, they just split
whatever they collect. Hiring a lawyer or spending your valuable time
deciphering legal forms is almost definitely going to cost you more up front.

~~~
jacquesm
Depends on your location, in plenty of places you can go to small claims court
without representation. Especially for an uncontested bill.

~~~
eli
Having sued people in small claims court, I can tell you that it will take up
a lot of your time just to fill out the paperwork.

Also, small claims court has caps on what you can sue for. More than a few
grand and it's not an option.

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mechanical_fish
Demand upfront payment. ;)

Failing that, make the quantum of unpaid work as small as possible. Offer them
the first three hours on credit, but make them pay a bill before they get a
second three hours.

Write your contracts to specify several intermediate payments. This is how,
e.g., construction contractors work: one third up front, one third at the
midpoint of work, one third at the end. Or something like that.

Write contracts that involve writing code and demonstrating it to the client,
but stipulate that you won't deliver the final product until after you're
paid.

Keep them on a very regular schedule. Don't go very far out on a limb: Don't
ever let yourself get several months ahead of the paycheck. This is
particularly important with the _first_ paycheck: Don't work too much before
sending the client some sort of bill -- even if it's just a partial bill --
and establishing that they will pay. For all you know, your client is a mid-
level employee without signing authority who cannot pay you without permission
from a higher-level manager in a rival department. Or something.

But, of course, past performance is no guarantee of future results. Customers
run out of money. Customers turn over their personnel. Customers have internal
reorganizations. Trust, but verify.

~~~
ericb
The going out on a limb part is tough as a solution as the testing itself
happens pretty quickly--it isn't quite the same as something like web
development which may go on for a while. I might switch to demanding half up
front for all but the largest customers, though.

~~~
mechanical_fish
Yeah, I realize this. But you understand your business better than I, and it's
possible that if you think about the business in terms of "I need to get some
earnest money as soon as possible" you'll think of a way to restructure your
deals.

The concept of "refundable deposit" may be useful to you, for example.

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mark_l_watson
I offer a 12.5% discount for customers who use 'express service' which
basically means that they agree to pay within 7 days of invoice and agree to
use my simple NDA/contract and not use up my time doing contract negotiation.

If they don't pay on time, they lose the discount.

I've been lucky: only one no-pay in 12 years, and that was for about an hour
of work on what was originally a half day estimate (the "customer" sincerely
thanked, but said that it was not worth his trouble to pay a tiny one hour
invoice). I just let it slide, but in retrospect, I wish that I had re-
submitted the invoice.

~~~
radley
I'll usually do 5% discount for Net15 (15 day turn around). More than 10% is
pretty steep...

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eli
We invoice again with a big red OVERDUE stamp and call. Then call again. And
again. Then send a letter and another invoice. Call again. If there are enough
outstanding accounts we sometimes hire a stern-voiced contractor to call
people.

Worst case, we give a collections agency the extremely delinquent (like,
_years_ old) accounts. They basically split whatever they can collect with us.
They usually don't get much (if people were gonna pay, they'd have paid)

Oh, and of course we don't continue to sell to people who are more than a few
months overdue.

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sganesh
Here's a businessweek slideshow..
[http://images.businessweek.com/ss/09/02/0212_how_to_collect/...](http://images.businessweek.com/ss/09/02/0212_how_to_collect/index.htm)

------
cubicray
some links:

[http://webworkerdaily.com/2008/08/28/getting-delinquent-
clie...](http://webworkerdaily.com/2008/08/28/getting-delinquent-clients-to-
pay-you-on-time/)

[http://webworkerdaily.com/2009/09/11/tips-from-the-
trenches-...](http://webworkerdaily.com/2009/09/11/tips-from-the-trenches-get-
your-clients-to-pay-up/)

[http://www.acuitydesigns.net/how-to-deal-with-non-paying-
cli...](http://www.acuitydesigns.net/how-to-deal-with-non-paying-clients/)

<http://articles.sitepoint.com/article/7-great-rip-offs>

