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Registered User
Join Date: Jul 2003
Posts: 4,247
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How do you Make your Client Pay for Services????
I have a client I've done engineering/design work for the past several months.
he's behind more than 1 month on a payment. and a week behind on another... he keeps telling me he is waiting for his client to pay him before I get paid.... Now this is BS... if I use that argument with my mortgage, we'll get penalized. He owes me 3 grand for work I did back in October (which is more than 1 month overdue now)... and he owes me 2 grand for work I did in November, which is 1 week late now. I'm starting to get frustrated. How would you handle it? I'm trying to be cordial and professional because he is my client. but I need to get paid. I'm losing interest on this money. perhaps I'm being too friendly and I need to "correct" the situation. Thanks in advance. I appreciate your help. ![]() Last edited by on-ramp; 01-01-2007 at 01:53 PM.. |
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Registered
Join Date: Sep 2001
Location: Tucson AZ USA
Posts: 8,228
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I used to employ the services of a dear friend named "Guido".
Seriously... Set up meeting. Be plain and direct; determine if your client has had some unforseen setback. If so, try to work out a payment schedule. If not, either small claims court or I can introduce you to Guido.
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Bob S. former owner of a 1984 silver 944 |
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Registered
Join Date: Mar 2003
Location: Charlottesville Va
Posts: 5,794
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I get this argument all the time when doing collection work for clients. I always ask where in their contract with my client is payment made contingent on receipt of funds from some third party.
As a practical matter, yes, it is a hardship for most small firms to be in your client's position, but you need to remind him that you've fully performed all that was expected of you for HIM, not for his client.
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Greg Lepore 85 Targa 05 Ducati 749s (wrecked, stupidly) 2000 K1200rs (gone, due to above) 05 ST3s (unfinished business) |
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Irrationally exuberant
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Can you find another/other clients? If so, I'd tell your client nicely that you like working with him/his company but you're going to have to take on some paying work for a while so you won't have as much time to work for them.
-Chris
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'80 911 Nogaro blue Phoenix! '07 BMW 328i 245K miles! http://members.rennlist.org/messinwith911s/ |
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Registered User
Join Date: Jul 2003
Posts: 4,247
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Quote:
What gets me is he wants everything done fast, but he pays slow! Last edited by on-ramp; 01-01-2007 at 02:09 PM.. |
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Registered
Join Date: Oct 2006
Location: Colorado, USA
Posts: 8,279
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It's the age old problem.
One method is to get a retainer up front, and not let them get too far behind. Another method is leverage. If your project is over, it often becomes difficult to collect. If they still need you, it's easier to get a past balance paid. At the end of the day, you can always send a demand letter and threaten suit. It helps if it comes from a lawyer, rather than you. Just be careful that there isn't some reason why you'd have to do an arbitration or some alternative dispute resolution before filing suit. Your contract may have that in it, or there may be a state statute requiring it, depending on what your field of work is. |
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Banned
Join Date: Mar 2005
Location: Travelers Rest, South Carolina
Posts: 8,795
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Re: How do you Make your Client Pay for Services????
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Moderator
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In the standard t&c's for professional work we clearly state that late payment may be subject to interest at the highest allowable rates and/or stoppage of work. We also do not undertake work without a deposit.
A face to face meeting is in order. First, ask the question, "are you happy with our work?" The answer will usually be yes. Then state "Wonderful, glad you are happy. Then to continue enjoying the benefits of our work, we must be paid in a timely manner. The failure to pay has caused unreasonable burden and for us to continue to enjoy a professional relationship, this must cease." Provide documentation to list billing dates and past due amounts plus reasonable interest expense. Explain that you will resume work when the past due balance is current, plus you will require a 50% deposit prior to undertaking future work. My $.02
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Don Plumley M235i memories: 87 911, 96 993, 13 Cayenne Last edited by Don Plumley; 01-01-2007 at 07:50 PM.. |
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Registered
Join Date: Jan 2001
Location: So. Cal.
Posts: 9,108
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A low cost alternative is small claims court, if it comes to that sort of thing. It's at a $5K limit here, or the State, don't know for sure plus I heard it's going up to $10K pretty soon. You get a judgement and it's your responsibility to collect - or the manner in which you collect.
Also, when this type of situation would come up, I found it a good idea to save all emails in a folder (electronic) and document all conversations. I'm actually haviing to do this now in a mirror situation from what you have. I made the mistake of prepaying for a service. That made it so that the guy didn't feel any urgency to complete it. I received many emails saying he was "almost finished" and "almost there" or would finish by such & such a date. After a short talk with my attorney, I wrote him a letter saying how I felt, what would happen if it wasn't finished by the time I needed it (that time is almost here), and accompanied it with my communication log showing the dates and content of our communications. I colored in red all of the times he said he was almost finished and/or promised a date to be finished. I colored in blue all of the times he gave me excuses for not completing. In the letter I told him he should get on the stick (so to speak) to "mitigate his damages" as my attorney said. He is now emailing daily about his progress.
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Marv Evans '69 911E |
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Registered
Join Date: Sep 2004
Posts: 3,650
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Overdue Bill / Collections Advice
Wow, I was just going to start a new thread about this but I figured I better search on 'collections agency' in the off-topic forum first!
I guess you guys can add me to the list of small companies that have a client that is overdue on a bill and need some advice. Here's my situation: I’m looking for some advice on what to do about an invoice that is overdue and yet to be paid. Here’s the situation: -I own a small I.T. consulting company. -I bill my clients on the first of every month for the previous month’s work, due net 15. -Generally I never have problems with late payments. Sometimes a reminder is needed but that’s all. -A client – who is a real estate company – is not doing well. In the past 6 months this company has downsized by about 90%. We had an I.T. consulting contract with this company that ended at the end of 2006. -This company is delinquent on the last 2 invoices. The total amount owed is ~$10k. -They say they’re going to pay but don’t know when. I asked where we are on the totem pole of getting paid. They’re response – not very high up. -They said they expected a payment to me the last week of December ’06 (for November’s invoice) but that didn’t happen. -I’ve been polite, haven’t gotten upset when calling them and asking about payment. -The money I need to collect is owed to the consultant that did the work on the contract. We have an agreement that he doesn’t get paid until the client pays my consulting company. My consultant has been patient but I really want to get him his money. So what do I do? I’ve started checking on collections agencies and it seems they charge 25% or more if they collect. I’ve also contacted my attorney and he said he’d be willing to send a nasty attorney letter if I’m at that point. He mentioned though that once a letter is sent, and a collections agency gets involved, that things get bad and sometimes you only receive pennies on the dollar. He also said that my relationship with this company would suffer. At this point I don’t mind severing my relationship with this company. It’s unfortunate that this has happened but business is business. This will be the first time I've had to do this. Any advice that you folks can give is greatly appreciated. Thanks! |
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Senior Member
Join Date: Feb 2000
Location: Lacey, WA. USA
Posts: 25,310
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Easy. You get half up front, and stop performing services while there is an outstanding bill.
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Man of Carbon Fiber (stronger than steel) Mocha 1978 911SC. "Coco" |
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coulda, woulda, shoulda
Join Date: Nov 2001
Location: Louisiana
Posts: 2,659
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I take 500 off the total for final payment, 9500 when I order, divide the remainder by 2, collect payment when pool is delivered. next payment before I pour concrete. used to do it in thirds but got screwed for 6500 once and ended costing me 10,000 after paying materials out of pocket. lawyer wanted 3500 retainer and 160 an hour.. estimated 25-30 hours.. guess what.. azhole got his pool for 2/3rds agreed price.. no sense spending more to collect what you're owed. collecting agreed contract price is easy because I can quit work anytime I don't get paid.. it's the 4-5000 extras added on after contract is signed and work starts that's hard to collect..people seem to think I work for free.. from now on... if I don't get my money, I get a lien on the house.. tired of getting screwed after all my hard work.. I must have 30-40,000 hanging out there from the last few years. tried small claims court once for 800.. won the case after 3 months, could not collect.. 8 years later I paid a lawyer 400 to collect the 1800 it had grown to with court costs and interest.. When I asked the guy that owed me when he was going to pay me since he had been swimming in the pool for 7 years.. he replied.. take me back to court. so I did.. they paid up day before court date.
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John 74 911s They laugh at me because I am different. I laugh at them because they are all the same. |
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Registered
Join Date: Aug 2005
Location: Cleveland, OH
Posts: 644
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Scott,
Collecting from a company can be difficult especially if they don't have any assets. Two years ago I built out a restaurant, it went belly up after 6 months, they owed me 19k, one of the partners was, is a friend of my and I kept after him, one year later a collected 9k. Most likely you will have to settle for less if any at all. Gino
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72 911 coupe 2.7L S Cams/Webers Street/Track 68 912 coupe 1.6L sold |
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Registered
Join Date: Dec 2002
Location: London
Posts: 1,831
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Interesting advice...
Remember however you have something they need...your skill and ability as a designer. If there are still any deliverables or servicing of the work you have done you can easily insist that it is contingent on being paid..... Similarly if you believe that they will want to use you again, the long game is to make it clear that the next job is not possible until payment has cleared....its a trick we use...and our clients can and do owe us $++++ often our monthly credit schedule shows $500k outstanding and overdue... If they end up not paying then they are no longer Clients... We always cost out the invoice versus cost of collection (lawyers etc etc)... Unless its a big invoice it is rarely worth it... |
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Registered
Join Date: Apr 2001
Location: Linn County, Oregon
Posts: 48,533
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Re: Overdue Bill / Collections Advice
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"Now, to put a water-cooled engine in the rear and to have a radiator in the front, that's not very intelligent." -Ferry Porsche (PANO, Oct. '73) (I, Paul D. have loved this quote since 1973. It will remain as long as I post here.) Last edited by pwd72s; 01-12-2007 at 05:23 PM.. |
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Registered
Join Date: Aug 2004
Location: New Brunswick, Canada
Posts: 5,472
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Re: Re: Overdue Bill / Collections Advice
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I can understand delays because of paperwork and bureaucracy, but it really irks me when $chit like happens because they are mismanaging their cash flow. As a consumer, if I rack up debt on credit it gets hit with interest. I don't see why this should be any different. Ya, I understand you guys need to maintain business relationships. However, are these the customers you want to work for, when there may be others out there who WILL pay on time? My neighbor runs an appliance shop, and was describing a similar situation he had with a consistently late paying customer. One day he was delivering 6 sets of washers and dryers to an apartment complex, and he mentioned they had several outstanding invoices. They hummed and hawed, and he told them "Well, if I'm going to be working for free, I'd just as soon go home early." Then he left. He started tagging interest on their invoices. They got the message, and yes they still use him.
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Jake Often wrong, but never in doubt. '81 911 euro SC (bits & pieces) '03 Carrera 4s '97 LX450 / '85 LeCar / '88 Iltis + a whole bunch of boats Last edited by notfarnow; 01-12-2007 at 06:43 PM.. |
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Banned
Join Date: Feb 2003
Location: So California
Posts: 3,787
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Relax and go with the flow. I am an Electronics Engineer that went into full time consulting over 20 years ago. Before I did this I had friends that had been full time consultants for a long time and they were all carrying a mininum of $20k to $50k in overdue billings. I never dreamed it would be possible to carry that much money on the books, but I ended up the same way as they did. The real crunch comes when a project winds down and ends. Payments for the last couple of invoices seem to drag on forever, you just have to keep billing them, politely, but firmly. Sometimes it helps if you have a wife or a cpa type call and try to collect for you, they can be firm, yet not endanger your personal relationship with the firm. Just never give up. In the end I was paid for every invoice.
I was forced to retire due to medical reasons, and I continued to receive money for 3 years after I quit work, thats how long it took for all of them to catch up. I can't tell you how to collect, but I can tell you that if you intend to stay in business you will end up carrying a lot of dough on the books, a lot more than you thought possible. But thats the consultant business, especially engineering. Note: In the meantime you bust your hump to get extra work with other clients to keep paying your mortage on time. I have had 17 clients at the same time. I did the work for the ones that paid well first. For the others I hired help and paid them when I got paid. (sound familiar?) Final word of wisdom. Never charge by the hour, just the job, thats the only way to make the bucks. If you made 3K by the hour, you probably could have made 10k by the job. Some of my best jobs came in at what amounts to a labor rate of $20,000 per hour. There is no Fking way any of my clients would have paid this as an hourly rate. Yet they were very happy to have the job done for the fee charged. Bid all jobs like you are doing them from scratch. If you have done something very close to it before, you only have to do half as much work for the same pay. This is also how you learn to afford to carry so much money on the books. Last word of wisdom, invest, invest, invest in the best tools available for your profession. Back in 87 I purchased a software program for $85K. With this program I could beat out most of the so called consultants in my business, do the work much faster, and provide a state of the art result for my client. Its not what a tool cost, but what it earns for you. Last edited by snowman; 01-12-2007 at 08:02 PM.. |
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Detached Member
Join Date: May 2003
Location: southern California
Posts: 26,964
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Not for this case, but if you ever get totally stiffed by a client, 1099 them as a "gift" to the IRS. Then they can pay taxes on it.
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Hugh |
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Banned
Join Date: Sep 2006
Location: South of Heaven
Posts: 21,159
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That works for me. ![]() |
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Banned
Join Date: Feb 2003
Location: So California
Posts: 3,787
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"unlimited support until you die". I think thats called marriage in most professions.
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