How Do I Deal with Late Payments & Deadbeats? Part I
So, you’re a talented entrepreneur, consultant or small business owner. You provided a great deal of services or products to another company, a bit larger and more established than yourself. And yet, even with all those resources, this bigger buyer for some reason hasn’t paid you yet, or not in full. Maybe they claim they are waiting on a payment. Perhaps they claim you did something wrong and they are using that either as justification or an excuse to delay or even forego compensating you, in part or whole. Could it be they are just plain dishonest? What to do?
Disclaimer: The following information does NOT constitute legal advice and is only for general educational purposes. Each situation is different and specific legal issues usually require additional research and investigation, so do not rely on this article to address a particular legal issue; use this as a starting point to gain a general understanding. This article, although educational in purpose and substance, nevertheless, might be deemed attorney advertising, and prior results do not guarantee future success.
First, don’t panic. This may resolve amicably and in time, sooner or later. Second, you have recourse, some of which either is very low cost or doesn’t require an upfront payment to use.
There are many legitimate (and illegitimate) reasons for a buyer not paying you on time. I mean, have you ever … um … missed a cable, utility or rent bill? And … what do you tell them? “Money’s coming.” “On the way!” “Ooops, sorry, I forgot.” “I’ll pay you as soon as my client pays me.” “Just please give me another month.” Sound familiar?
If you find yourself in this situation, is it so hard to believe a company can have this issues, also? “Well, Jeff, they play with Monopoly money and they’re all kinds of rich and stuff, so yeah, I don’t see why a company would ever be in the sorry straits I sometimes find myself in.”
That’s just not true. A lot of companies are just like you. They might be a “Solopreneur” with stretched resources. They could be a huge company but something might have happened suddenly and unanticipated, like the Feds told them they have to comply with an expensive new regulation, or their fleet of transport vehicles suddenly needs to be fixed (Boeing 737 I’m talking to you). Don’t think financial crises don’t happen to other small, large or huge companies (Lehman Brothers anyone?).
Stay In Touch / Be Creative and Flexible
If your Buyer is experiencing difficulty, stay patient and in communication with them. Keep up regular negotiations and conversations about when and how you will be paid, try to get steady payments. Be polite, but firm and, if you can, helpful.
For instance, offer a payment plan. If you are willing, offer a discount off the top for a lump sum payment now. See if they are willing to pay interest for a longer extended period of time. If they have something you want, trade a bit of the bill for their services. Be creative!
Send Monthly Bills / Invoices
Whatever, you do, ALWAYS BILL THEM EVER MONTH WITH THE REMAINING BALANCE. TRUST ME. This sets up your legal rights for a potential claim called an “Account Stated.” Basically, if a customer holds a bill without protesting it, many courts see that as an automatic admission that the bill is correct.
Try Obtaining an Acknowledgment of the Debt
Also, if you can, get the other side to admit they owe you the bill by requesting that they sign something acknowledging that is what they owe you. It is theoretically possible that can be used for a procedural maneuver in the court called a Summary Judgment in Lieu of Complaint, which is legalese for if the matter has to go to court, it might take two months instead of two years.
Be Careful About What *YOU* Put In Writing
While trying to work out the issue, you may send emails back and forth. If, you have messages giving them more time to pay or "understanding" their difficulty, these may be used against you later if you seek penalties, interest, or any kind of basis for saying that you expected payment earlier or even waived part of the amount owed to you.
Now, unlike most lawyers, I'm not going to tell you don't be a good person. If you are caring and compassionate, that's fine. As I said, we all run into trouble at sometime. Just be careful how you phrase things. Words (and intent) matter to a court. If you say, "I understand, pay me when you can" a court might see that as you essentially walking away from the debt or giving them another year. How about, "listen, I understand you are having some difficulty now, can you pay me $50/month for now, and do you think you could pay up the remaining balance at some point in three months?" or by next year, or let's revisit this in three months, etc.
Next article on how to deal with legitimate disputes and illegitimate denials for your bill!