How do I collect from a non-paying client?
I recently completed a project for a client, at a reduced rate ($5000 vs $10000) based on a carrot being dangled in front of me. Bad idea to begin with I'm sure. However, despite the fantastic deal they received, and all the items listed in the project scope being completed satisfactorily, they have not paid their bill which is now over a year old. I suspect that they never intended to pay the bill as they have not even looked at it according to my invoicing software! I have even offered to compromise on the price just to get something out of them but they don't even respond to emails or phone calls. I have been told that my only option is small claims court, however there was no contract or PO issued (yep, learned that lesson) and the one person that can substantiate my claims that the project scope was completed and that the client was happy with the end product is no longer willing to put that down in writing (for a good reason).
What can I do? Can I still take them to small claims court? What are my chances when there is no contract, PO, or a witness to support my case?
What a frustrating situation. I can see others have already advised on what precautions to take in the future when working with a new client, so you don't end up in a situation like this again.
Small claims court can be time-consuming and costly, even for a $5,000-$10,000 project fee. However, talking to a lawyer is still a good idea. The lawyer can contact the client on your behalf which may get the attention of the client better than your personal follow up emails and phone calls.
As others suggested, a collection agency could be a good option for you. Business.com published a guide on How to Handle Non-Paying Clients. In the guide, they recommend reputable collection agencies reviewed by their team. You can also ask your network for recommendations. Make sure you find out the agency's track record before making any hiring decisions. Hope this helps!
If you are stuck with the wrong business deal and your want to come out of the situation, then try a batter deal.
If you fail in doing so, the small courts are the best option of arbitration. Does not matter if there is no written contract, at least you can take the chance.
Mr Glen, just think it is a 'bad dream' and forget it. You rather focus on new assignments But, the lessons you have learnt should be your new way of doing business. Florence MacDonald
I understand your pain & fraustration because I also had to deal with same issue. About 4 years ago we were hired to produce high quality video for $7000; we only received $1000 but couldn't collect the rest of it. We sued them in small claims court and judge ruled in our favour but still couldn't collect the money. It has been 4 years and with interest it is at $11.000 and even though I have a judge decision in our favor and we went to the collection agency but still not a single dollar we received. I really hope you can collect your money.
If you have emails to substantiate your claim that you did indeed do the work you might be able to use those in small claims court. I would try contacting them through social media outlets and requesting that they contact you. Nicely at first, then bring up the "please contact me about your bill" in their social channels. Often this will get people motivated to contact you.
Going forward NEVER DO ANYTHING WITHOUT A CONTRACT! Even if it's for a family member, or best friend. You need something to show that you have been hired to do a certain thing.
I had the same thing happen to me with some writing. It was one of my very first jobs, and one of my greatest disappointments. Some people will try to get everything they can without paying for it.
You really have a couple of options here: 1. Bite the bullet and move on.
2. Spend your valuable time and resources to try to make your case and take it to court. (it sounds like you don't have much of a case, so I'd go with #1.) 3. If you did website work for them. TAKE IT ALL DOWN, login, delete your files, and move on.
It stinks, but take this all as a lesson learned. Owning your own business can be hard.
Yes, you can still take action in civil court.
The ( their) acceptance of the project in itself can support a contract to perform the services that are not yet paid for. Collect all emails and texts, records of calls, etc..put together a timeline to show a lawyer.
I would need more information on what you can do to "push" a payment- yet I really would like to remind everyone that when we run into this situation, everyone has dealt with non payment for various reasons, that at the END of it- you can still use it on your taxes! This is key positive in this type of financial situation! You can write off the non payment which will assist your over all tax load and then THEY, non paying client, will have to deal with that/this on their taxes! Speak to your financial person on the best way to claim this on YOUR taxes. This unpaid amount will act as if you DID get paid - in a deduction. I deal with this because I donate hours- and I can use my donated services on my taxes in a write off too. It offsets enough to be of service. Yet I do "donate" a substantial amount of services to my state clients. AS far as a year old non paid bill... you can sell the debt, you can write it off as I suggested earlier, you can turn off an aspect of what you supply- it is an option and yes; you can sue. Speak to an attorney. What ever action(s) you choose please do so with integrity, class and professionalism. Every difficult business situation is an opportunity to shine through the muck and separate yourself from the masses.
Unfortunately, so much time has gone by. You learned a valuable lesson. GET A SIGNED DOCUMENT. You can still take them to small claims court. Do you have any proof of the project being done, e.g., phone records, emails, anything?
I'd call a collection agency. Even if you do win in small claims court I don't believe there is anyway to enforce the judgment.
Small claims court is an excellent alternative. Depending on where you live, the amount you can bring to court differs. Usually the person bringing the claim is looked on more favorably, unless, of course the other party has an attorney. Bring ALL the detail paperwork that you have - contract, invoice, printed copies of ALL emails, and anything else in writing.
In NJ the courts first assign you to an arbitrator who will try to settle the case without going before a judge. It is critical that everything is correct and in your favor.
I was on the receiving end of a small claims action where the programmer did a LOUSY job and then tried to collect. We went to court with all the details I described above and presented it to the arbitrator and said we were going to let this slide because he was a small business. But since he brought the action, we will file a full law suit. The case was dropped.
IMHO, you do have a case for small claims court. Despite the lack of a signed contract, you probably sent files and/or links for review through email - save them, especially the replies from the customer.
If you have any lawyer friends who would be willing to write a demand letter in exchange for a lunch, you might want to start there. Good luck!
Unfortunate for sure. Small claims would be your least expensive way but you could ask an attorney you know to send a certified letter woth intention to suit plus court costs and attorney's fees.
That should get their attention.
At least you learned the big lesson, this was a sales problem on your part for both the price, the promise and the contract.
There are no conditions here to preclude you taking them to small claims court. You will need to validate that in your state $5000 constitutes a small claim (it likely is but is set by states and can vary). Having a verbal agreement and proof that service was done as well as being able to substantiate (on your end) that it was worth $10,000 and completed can certainly be enough. You need your documentation of attempts to collect (even if that is a written note about a phone call) and if there is any documentation of a dispute by the client for incomplete or incorrect work.( I would get your documentation notarized as well.)
Having one-sided evidence can get you a win in court, if you have good documentation/evidence, but that won't get you money only a judgment. You will still have the issue of collection and there are stalls and tactics, including counter suits that can result. They may not even show up which gets you a win, but again, not direct payment. Having a judgment is a legal claim but you might want an attorney's guidance here.
On principle you should certainly collect, filing in court is a last resort but a perfectly acceptable one. Have you spoken to a collection agency? They will take a piece but only if they collect something. The other thing you can do is have your (an) attorney send a notice of intention to file a claim if the issue is not resolved in x time period, or if you file a copy of that with an offer to resolve prior to trial. That documentation, and any response can also help you when before a judge.
and PS, on a $5000 job worth 10 you should ALWAYS get paid some portion up front.
Did you send any emails?
Was the cost of the project discussed?
Do you have any replies?
Were any milestones discussed?
Did you email any invoices?
Do you have proof they opened them?
If you said yes to these questions and haven't contested the invoice you should be able to collect.
The amount of your claim is too big for smart claims court in most all municipalities. It should be handled by a collection agency and/ or collection attorney. Using an accredited agency will increase the probability of collecting as well as getting an attorney to handle your case if one is needed.
Most collection attorneys in Canada do not want claims under $10,000 and most are not contingent and therefore payment upfront. Not matter what course you take, if a suit is filed there will be filing fees.
Can the software you created be destroyed so they can't use it?
I agree with Matt and also suggest that you have in all your contracts / agreements that all work will stop when payment is not received within
x days of issuing your invoice.
As I suggest to all our clients regardless of their size:
1. Add the following term in your contracts and invoices: Should any delinquent invoice be sent for collections, the debtor will be responsible for all fees to collect that debt including legal.
2. Establish standard operating procedures for your accounts receivable.
Which includes all invoices that are 90 days past due be sent to a collection agency.
(At ninety days past due you are 30% less probable of getting paid. At six months you have a 52% probability of getting paid. At one year there is 23% probability of getting paid)
I am soooo sorry you are dealing with this. I am in a similar position for far more money, so what I will say is make a decision to continue to pursue them and get vigorous about it, or decide to walk away - but I agree with the others $5000 is a lot of money.
I definitely support getting the demand letter from a lawyer - if they are still in business... they will take it more seriously knowing there is a lawyer after them... especially if they knock on their door (by fedex or a server).
Though you do not have a signed SOW, etc... look to see if you have any correspondence from them, that provides indication of your work, collaboration, discussions of tasks, etc... from them - even just in email form. A good lawyer can use it.
Would think through whether to go into a suit situation, as it could cost you more than the $5K..... unless you find someone who will give you a fixed fee (less than of course)
A collections agency could take up to 50% (at least here in US)... but something is better than nothing.
I would not hesitate using social media as long as you stay professional and factual... not defamming the company or a person... but providing insight of their business behavior is helping other individuals and companies who could get into the same situation. i.e. had an issue with a company and a product they sent me... I tweeted about it and had them respond within an hour. Always be professional and the better person - no matter what the outcome.
Lastly - be sure to get all of the appropriate business contracts and agreements in place for your business...and do NOT do business with someone unless you receive (not just send) the customer a signed copy of the SOW, contract, work for hire, agreement, NDA, etc..... Protect your business as they will protect theirs.
I am sorry to hear this happen with you at the very beginning of your career. I guess here after you will make it a point to submit by email the details of your contract, negotiating terms and every single communication that you make with client.
When you ask anyone to put it in email format they have to oblige for what they say in writing. At the end you have made a big mistake in believing on this client on their face value and not anything else through professional correspondence.
The only way to recover your money is wait for the next opportunity that will come from this client. It will come to you if you have done a very good job in the beginning. They will come to you and when that happens get it recovered with compound interest.
I mean to say if your work is exceptional this client will come back to you for their next project. Then make sure you do everything in email correspondence even the proposal, and raise invoice through many online software available for small businesses to use it. Ask some collection agencies, however they will only take it if any written correspondence available.
Check and keep your senses wide open and alert.
Good luck and all the best.
Sorry to hear about this. My experience is to understand if they are sensitive to social media pressure, if so, then begin to post on corporate social media sites on what a great company and fantastic partner they are to deal with and how you are looking forward to continuing to work with them once they have this small issue resolved. Facebook, google plus, twitter, instagram, snapchat,, linkedin company page, yelp, glassdoor review go to each with the same message, don't say anything about how they owe you money but just that same postiive message with just this little thing that needs to get resolved.
If nothing happens amp up the pressure, look up on linkedin and get the names of board members and the executive team, do the same thing compliment the company and how you look forward to getting this small issue resolved. personal facebook, instagram, linkedin messages and inmail.
Its been a year, they have no reason not to pay you. By doing this they get the message that unless they want to have their brand tarnished, they need to come to settlement terms with you. This is burning a bridge on the company side but then again they aren't a good client anyway. I have had this work successfully with a company that owed me but cut off all contact. Once I began this social media campaign I had a call back from the founder asking what I wanted and I got it.
All the best, hope this helps.
How well is your business going? I don't care how good it is $5000 is still a lot of money but my suggestion is with risk to your reputation. First I would show up at their office with a letter from an attorney demanding payment. If there is staff working there it may aid with the discomfort, email is easier to ignore. The other suggestion is to start with hitting them on social media, but since this is a space you work it could make other potential clients uncomfortable.
I have some other ideas if you want to reach out directly. The other advice here is all good advice and think about getting money upfront or in stages along the project.
You may end up just having to chalk this up to a learning experience: here's what I've learned to do in my 8 years running http://www.medialabpro.com ...
1) Break down payments into many small payments, with 20-25% up front, and milestones for which you are paid prior to the start of each milestone, and one small payment upon completion (10-15%). If they are unwilling to pay anything up-front, then I take it as a red flag that they are not going to be reliable clients.
2) Build the site on your own development server - so the client can see progress and you still maintain ownership/control of the code itself. Do not transfer the code to their server or live domain until you have received final payment.
3) Do not accept or negotiate alternatives to the above two points; write these into your proposal/contract and enforce them as your company protocol. The only times I have ever been burned on this has been times when I mistakenly trusted clients.
Contracts and POs are great supplements, but still require enforcement that can be more costly than the amount owed: a protocol that protects you from getting stiffed from the start is the only bulletproof way to ensure you are paid for your work.