First non paying business customer

[DanF]

I only have a handful of business clients, and most of them I been doing work for since a long time, and we built a relationship.

Earlier this year I was reached by a business owner who owns a construction business, small one, on my Facebook page. He wanted me to set up some automation to backup Google Drive, which he already had in place by another tech (which in his words "wouldn't respond to his calls"). He also mentioned that in the future he wanted to set up a structured file sharing method, so he can share files securely with his employees. He also wanted to buy a domain for email purposes, etc.... He said that the backups were the most important thing.

So I've met him at his office, discussed these things and I told him that I can guide him through all this and even set things up for him. Gave him a quote for the backups and he agreed. Prepared the script offsite, and implemented it onsite. He wasn't there, sent him an invoice, and he paid immediately.

A few weeks later he asked me to proceed with the domain etc... I sent him a detailed quote, that included a quote for me to consult him on what to do, and a quote for me to also implement the solution. He agreed to proceed with implementing the solution, together with the domain purchase, hosting, M365, and all the good stuff. I did this work remotely, he paid for the third parties and I sent him an invoice for my work.

More than a month later and I am still waiting the payment. I messaged him around 3 weeks after the job, and he said that he missed my email and that he is very sorry. I re-sent the email and the invoice by WhatsApp. WhatsApp messages do not show as read, but I know he opened both the original email and the second email, as I use MailSpring and it shows when an email is opened. Today, 6 weeks later, I sent him another message reminding him about the pending invoice and received no feedback.

So at this point I have a feeling that this customer hops from one person to another, and doesn't pay them. The only thing I can think of is to call him and keep sending him reminders by email and WhatsApp. But I also want to find a way to not have to deal with this again in the future. I can't think of anything more other than starting to charge a percentage of the cost in advance (naturally, if I charge by the hour it's going to be an approximate cost).

Anyone here had to deal with such situations and have any tips for me? I am trying to attract business customers, but this is discouraging.

 

[britechguy]

Anyone here had to deal with such situations and have any tips for me? I am trying to attract business customers, but this is discouraging.

This really depends on how much money we're talking, and whether it does appear, absolutely, that no payment is forthcoming. If it's a high-enough dollar amount to pursue it in small claims court, that's an option, but you're still not guaranteed payment.

It is discouraging, but don't let "one bad apple spoil the whole bunch." I've had one client stiff me over the time I've been in this business, and it was the parent of a local college student who I'd done business with before, and perfectly normally. I cage-rattled regarding payment for several months. My invoices have the following at the bottom:



One could add interest in the Past Due categories. But in the end, if they've ignored me for 60 days, I'm close to writing off, and 90 days I do write off. I don't have the time or interest to pursue low dollar amounts in small claims court. I'd not even think about it for under $500 just because it is (to me, anyway) a PITA to take the time and effort.

Don't let this stop you from cultivating every client you possibly can.

 

[DanF]

Brian, appreciate your time!

It's not a substantial invoice, but since I don't have a lot of business customers (with majority being break/fix repairs), it's still a nice pay check for the job.

The problem I see with interest, is that if the amount is not substantial, they assume that I will not take the matter legally forward, as they know it is simply not worth for me spending the money.

But your reply brought something else to my attention. While I could add interest for past due dates, my compiled Terms and Conditions are targeted towards the break/fix repair customers, and don't apply much to such jobs. It was also never vetted by a legal person, so I don't know how valid are they in the eyes of a court. So this is definitely something I should check. It's one of those things you find how important they are when they're needed.

 

[seashore]

But I also want to find a way to not have to deal with this again in the future. I can't think of anything more other than starting to charge a percentage of the cost in advance

Exactly that. A third up front, a third in the middle, and the remainder after completion.

 

[DanF]

Exactly that. A third up front, a third in the middle, and the remainder after completion.

Lesson learnt

 

[britechguy]

A third up front, a third in the middle, and the remainder after completion.

If you have any idea what "a third" might be.

The last business job I had is still ongoing, effectively, months later. I billed monthly and we were nowhere near to done at the end of month one. Had payment not been rendered, and promptly, services would have stopped, and promptly.

I hasten to add that I like your approach if you are able to have some guesstimate up front. I've long ago learned with my client base, whether business or residential, that it's very difficult indeed to have an accurate guesstimate. That's mostly because once "the doctor is in" an unknown number of "hey, doc, what about . . ." additions occur after the initial ailment has been addressed.

 

[YeOldeStonecat]

For new clients, until you build a relationship with them, and learn their AP pattern, bill for your costs up front, wrap up with labor upon completion.

If they bought a computer online from Dell Smell....they'd pay up front! If they went and got a laptop from Best Buy..and purchased 365 with it, they'd likely pay for that up front too!

We're 99% biz clients, much of them on monthly MSP plans. Now 'n then we get a client that I want to shut off....not often. One example is a client we've had for over 10 years, historically they go for months without a check. Never bothered us in the past, as their monthly was small.(they used to pay their 365 licenses directly...CC online with the 365 tenant) But not long ago they did a huge expansion, hired a ton of people, wanted to get a bit more tight with security...so I upped their licenses to M365 Biz Prem, and...since they were around 75 staff members now...I got greedy and wanted to take that MRR through our CSP so I flipped their licenses to us billing them. They also did a new office buildout...about 15 grand of network hardware. I did take a 75% up front on the hardware at the beginning. Took a while to get the last bit, and we're I think...just passed 5 months behind on the 365 licenses (>75 licenses of M365 Business Premium is up there $ wise). Already went to their office to talk to them once...got the old "Check will be in the mail next week...sorry about that". Here we are 2x months later. I'm about to flip them back to their own CC online...it's not killing us...we have >150 biz clients.. but it's still a bit of a pin prick.

 

[HCHTech]

Also, IMO, it is important to find the administrative bandwidth to always follow up on invoices that are past their due date - as soon as they go past. If you are net-30, then follow ups should be going out at 31 days. Just regular follow ups. It sets the right example that you don't let this stuff go. And keep following up until they pay. We do it once per week once they go over 30. If they hit 60, we do phone calls. Yes, it takes time, but in the SMB world, if you don't complain, they will just assume you will wait a while longer if they are in a money crunch for some reason. Keeping on top of AR lets them know you are not willing to wait, and usually gets you paid more quickly.

Unfortunately we have never found a way to automate this process (thanks, Quickbooks). In practice, we run the AR report once or twice per week and then individually review all past due invoices. We use the memo line on invoices to keep track of our follow-ups. I'm lucky to have an admin person that does all of this - and I review it frequently as well.

If we get a chronic late-payer, they get on the "pay in advance for any services" list and we get their credit card number to make sure that happens.

 

[callthatgirl]

100% before you do the work. I don't like invoices and this is exactly why.

I hate them but have 10 in the queue lol, mostly just on-going projects that have time built up.

For you, drive over there and just stop in and see what's going on.

 

[DanF]

100% before you do the work. I don't like invoices and this is exactly why.

I hate them but have 10 in the queue lol, mostly just on-going projects that have time built up.

For you, drive over there and just stop in and see what's going on.

Right... I guess lessons are learnt here In this case the work was done remotely, but still. The thing about charging before hand is that I didn't know exactly how much it was going to take me, especially since I did this particular job for a customer the first time. But I gave this business owner an approximate quote in advance (it was a range) based on how long I thought it would take me, and I charged within the range.

And I think this would take us to another related discussion which I guess has already been discussed numerous times before... whether to charge by the hour or by the service.

 

[callthatgirl]

here's what you can say about that...

"Sir, happy to help, I can do it remotely, I have a form you have to fill out first, then I collect 1 hour to hold the appt, and this might go over an hour, I'm not sure how long it will take me to fix it"

boom. done.

 

[callthatgirl]

then boom, at the 1 hour mark, get the card again lol

 

[thecomputerguy]

Delete his MX record.

 

[DanF]

Delete his MX record.

Unfortunately I don't have access to his domain's management or M365. We created the accounts there and then and he was the one inputting the passwords.

 

[Blues]

While I generally don't like the idea of using certain aspects of a job as a hostage there is definitely a benefit to it in cases like this.

 

[Peperonix]

Using email, SMS, Whatsapp, and so is unefficient in this type of situation.
Better call your client.

Concerning this particular case, your client is in the construction business, which is both cyclical and where is not uncommon for projects being delayed, companies to be paid late, even though a lot of money can come in all at once.

I would advise contacting the customer by phone. Remind him of his obligations and try to clarify with him why he is late in his payment.
In case he is through difficult times, try to negociate a partial payment ASAP and and a deadline by which it undertakes to pay the balance.

If your client does not answer, leave a message on the answering machine, explaining why you are calling and asking him to call again.
Repeat this daily or every two days.

If your client still does not answer, or does not respect his new commitments, fill by hand a pursuit requisition form.
Scan it, email it to your client, and make him know that you will deposit the form if you did not receive his payment at some date.
(e.g. within 48h to 10 days). This helps in some cases.
If there is a"observations / comments" field of the pursuit requisition form, do not forget to remind here you previous phone calls with their dates. This will help the judge assess the situation

The problem I see with interest, is that if the amount is not substantial, they assume that I will not take the matter legally forward, as they know it is simply not worth for me spending the money.

And most important, do what you have announced , even if the pursuit costs to you, and even for small amounts ; bad payers fear that their name will be published. Mention the legally admitted interest rate on the pursuit form ; the prosecution office will compute the interest for you.

Be patient, as it can take years, but is worth it.

Good luck to you!

 

[DanF]

Peperonix, valuable advice, thanks for your time. Appreciate you.

 

[britechguy]

Be patient, as it can take years, but is worth it.

Before I say anything else, your overall advice was quite valuable.

But this particular assertion is opinion, and one I don't share. Spending years of time and effort on some trivial amount of money, where that time and effort itself was worth more than that amount, as was the work you could have been doing for more money instead, is very often absolutely not worth it.

While you think it may be worth it, then by all means, go for it with gusto. If you ever reach the point where you have the feeling that this is way more trouble than it's worth, write it off and cut your losses (emotional, investment in time/effort, and financial). And if you're questioning whether it's worth it at the outset, it almost certainly is not.

 

[Peperonix]

Hello Britechguy,

Mention the legally admitted interest rate on the pursuit form ; the prosecution office will compute the interest for you.

Be patient, as it can take years, but is worth it.

I probably should have clarified that these two assertions are connected and I should have linked them in a single paragraph.
What I meant was that the work of the debt collection office can extend over several years, especially if the late payer is also be in trouble with other creditors.

As I am not a native English speaker, I would also like to clarify what I meant by "prosecuction office" : I mean the state office, and not private debt collection company.

By filling the pursuit requisition, you outsource the debt collection work.
It takes all the emotional, investment in time/effort and financial aspect off your shoulders.
The only problem that I see, it the sometimes high costs invoiced to you by the debt collection office until they can possibly collect the money.

I see however several benefits (in my country):

1. In case the debtor is a private person, the prosecution office may impose a partial monthly seizure from wages or unemployment benefits.
2. The office may impose a seizure of assets.
3. All is done "automatically" for you ; you only have to pay the invoices from the prosecution office during the procedure.
4. In case the debtor doesn't have sufficient income nor assets to compensate all his debts, you get a certificate of debt recongnition that you can exchange a security paper, which effective value of course depends on the likeliness that the debtor will one day have enough income or assets to be seized.
5. You make it clear to all readers of the official sheet that with your company it is not a good idea to expect that you won't make the necessary effort to recover the money if the amount is not substantial.
   You avoid this kind of behaviour :

if the amount is not substantial, they assume that I will not take the matter legally forward, as they know it is simply not worth for me spending the money.

Yes, if often costs. From a pure financial perspective, I agree that on a individual case basis, it is not always worth it.
But the world is not only finance.
It is also kind of respect for yourself and other companies. A solidarity which on the long term benefits the entire profession.
This is why I consider that, even if the debt collection procedure is slow, I consider worth launching it.

 

[thecomputerguy]

Necro?