[PcarPhil]

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!