One of the most commonly heard complaints — especially from small-business owners — is the failure or refusal of their customers or clients to pay their bills on time, or pay them at all.
If you are thinking, “Yeah, Dennis, you got that right!” then I submit that a certain amount of this failure to be paid could be your fault. Allow me to cite an example that occurred last week:
“Wonderful Tree Trimming and Landscaping” is a 30-plus-year-old mom-and-pop company in my town. “Marge” runs the show, and she is the nicest, most patient business owner you’ll ever meet. And that’s the problem. She is way too nice, way too patient and non-confrontational to a fault.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
I got a call from her office manager, asking if I can help them with several past-due accounts.
“Of course,” I reply. “How old are they?”
“Only two years.”
“What? Only two years,” I repeat in a less-than-happy tone of voice. “What were you folks thinking?”
“Well, Marge likes to be patient and nice to people.”
“I am not! Please scan and send me the bills now!”
Not paying for services rendered could be fraud
Fraud and theft of services without legal justification revealing an intent not to pay, similar to dine-and-dash restaurant thieves, could justify an award of punitive damages. Notes on the accounts at Marge’s company revealed textbook examples of fraud and theft of services by people who agreed to pay for the tree trimming but offered one nonsensical excuse after another for not paying, made repeated promises to pay but never did or contested their credit card charge.
I reached one of them and asked that he bring a check to my office. He replied, “Money doesn’t grow on trees.”
My response in a most unfriendly tone of voice was, “I am going to enjoy suing you for the tree trimming and punitive damages for your obvious lack of intent to pay.”
Soon thereafter, I received this email from Marge: “Whatever you did worked! He called me around 2:30 p.m. and brought us a check by 3 p.m.! He had a scared face!”
Having patient, nice staff is not a virtue if customers won’t pay
In my experience representing small-business owners who are owed money, patience is not a virtue. A strong office manager/collections person who knows what not to say or do and who you authorize to immediately jump on past-due accounts is critical.
A common ploy of these kinds of customers is, “Gee, I never got your bill, so please mail another.” Do not fall for that, if possible! Fax the bill to them. This gives you proof of receipt. If you are in the same town, go to them and politely hand a copy to the customer or, if it’s a business, a receptionist.
Many online recommendations suggest being sugary sweet on the phone to your past-due customers. I disagree. The customer who, without justification, doesn’t pay is a thief, and the sooner you and your people recognize and accept that, the better.
So, when payment is past due, promised to be received by a certain date and does not arrive, you have one choice: Call and say, “No more delays. We will pick up a check at your office today, and if it isn’t there, this goes to our lawyer, who isn’t called Mad Dog for no reason.”
Why even put yourself at risk of being jerked around by an unknown customer? Do your research in advance. Check your court’s plaintiff/defendant index to see if the customer has been sued and for what. You can find this information on your county’s court website, generally at no cost to you. Require a signed credit application that will allow you to check their credit and find out if they’ve gotten in trouble before for not paying.
Great way to get stiffed: Convince customers you aren’t serious
A terrific recipe for being stiffed is to convince your customer that you aren’t serious about being paid, and I hear this all the time: “Well, we’ve been sending them past-due letters every month for the past year, and we thought that would scare them into at last doing something.”
They did something all right: They ignored you!
If the first letter or phone call gets no response, consider having your lawyer place a call and send a demand letter. That should be very inexpensive. Still no response? If you are within or close to your small claims court monetary jurisdiction, file suit.
Action earns the respect of employees and other customers
“When small-business owners act to preserve their bottom line by giving collections all the attention deserved, this earns respect and loyalty from employees and your customers. And, no matter how well you pay someone, respect and loyalty have no price,” observes David Schein, Cameron Endowed Chair of Marketing & Management at the University of St. Thomas in Houston.
“I tell businesses to have a one-two-three approach to collections,” he says. “Send invoice within 30 days. If not paid in 60 days, send letter with overdue invoice indicating that it will be turned over to your attorney if not paid promptly. At 90 days, turn it over to your attorney. Many of my businesses get paid with that 60-day letter.”
In case you wonder, “Dennis, how do you personally feel about these situations?” I’ll tell you. Angry, personally angry, and I share the feelings of my clients who have done the work, performed the service and been ripped off. To treat people that way, in addition to a breach of contract, is simply immoral. Collecting those debts gives me a great deal of moral satisfaction.”
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
related content
- Going to Court? What Do You Know About Your Judge?
- Advice for Chiropractors Who Take Personal Injury Patients: Getting Paid
- How Business Owners Can Avoid Four Big Financial Planning Mistakes
- Deadbeat Lawyer Trying to Rip Off Doctor Gets Busted
- Company Flouts Product Warranty: What Happens Next?
-
13 Answers to Pressing Social Security QuestionsFrom smart claiming strategies for couples to tips on maximizing your monthly check, we have advice that can help you.
-
Keep Tax Collectors at Bay with Muni Bond FundsMunicipal bonds can be good insurance against inflation — and interest is tax-free. But as with all investments, understanding risk is key.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the FairwayThink of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty MovesIf you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income PlanningOnce you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.
